United Looks at Major Jet Purchase

United Airlines parent company UAL is in the market for up to 150 new jets and could place an order for them by this fall.
This is a HUGE development in the aerospace business. According to a letter to employees from United CEO Glen Tilton, UAL's looking for wide-body jets, the twin-aisle planes that typically seat between 190 and 350 people. These have list prices of $130 million to $300 million each, although it's a safe bet that Boeing and Airbus, faced with a stagnate market, will knock more than 30 percent off the sticker price -- and probably more as they jockey for what will be one of the biggest deals of the year.

United also is timing this brilliantly. It's got one of the industry's oldest fleets, but it sat on the sidelines during the aviation gold rush of 2005-2007, when between them Boeing and Airbus were selling more than a thousand planes a year apiece; something that was unprecedented. Part of the problem -- when United was ready to buy, the waiting list to get new planes was stretching out till 2014-16.

But now, with airlines worldwide in financial turmoil, many of the eager buyers from 2006 are looking to delay deliveries. That means United could come in and negotiate to take planes originally meant for another buyer -- cutting ahead in line, if you will -- which would allow it to get the fuel-efficient new planes much faster.

And, perhaps the most-significant thing is this: the Wall Street Journal quoted American Airlines chief Gerald Arpey, who said that while the credit crisis has made it difficult to finance aircraft, just recently banks have begun calling that airline, wondering if they need a loan.

"If American can find financing, United can, too," Boyd said.

What that says is that credit is starting to flow again, and airlines with reasonably strong balance sheets should be able to get financing to allow them to either buy new jets at cut-rate prices -- like United's doing -- or at least to pay for the planes they've already got on order, thus easing the pressure on Boeing and Airbus's backlogs.

All this should make things much more interesting when all the global players gather later this month outside London for the Farnborough International Airshow, one of the big industry gatherings of the year.