Battle brewing to make United planes
A United Airlines jet on the runway at the St. Paul/Minneapolis International Airport in Minn.
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Kai Ryssdal: Airlines have been suffering as much as anybody in the recession. And United is no exception. Its share price has fallen about 85 percent since it got out of bankruptcy in 2006. So it was a bit of a surprise this morning when United said it's going to order 150 new planes to replace the ones it currently has. Ashley Milne-Tyte reports the airline seems to be doing a little recession bargain hunting.
ASHLEY MILNE-TYTE: Boeing and Airbus have had a difficult couple of years. They've both had customers cancel or put off orders recently. Darryl Jenkins is an airline consultant. He says the plane makers will fight hard for United's business.
DARRYL JENKINS: This will probably be the biggest single plane order for the next two or three years.
And United's in a perfect position to get a great deal. Michael Boyd runs Boyd Group International.
MICHAEL BOYD: It's not beyond comprehension that they might have Airbus in one room, Boeing in another room, and just shuttle offers back and forth until one gets fed up and leaves the building. So it will be very, very tough negotiating.
So tough that United should be able to obtain attractive terms not just on the price of the planes, but on the financing package to buy them.
BOYD: The manufacturer will have some financial institutions lined up, the manufacturer also goes to suppliers, like the people who make the brakes, the people who make the engines, and say "You come to the financing party, 'cause later on you'll be selling parts to this airline."
The decision to order new planes could help United in other ways. Consultant Darryl Jenkins says it comes just as the company is addressing its difficult relationship with its employees.
JENKINS: Pilots make different amounts of money flying different planes. So this uh, could indeed be a bargaining chip in a labor negation. Certainly the relationship at United between pilots and uh, management, is -- is not good.
Management and staff are thrashing out new labor agreements right now.
I'm Ashley Milne-Tyte for Marketplace.