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record-breaking

Why United's big bet on travel is a big risk

United Airlines has unveiled its biggest airplane order ever, making a major bet on a full return of business and international travel. 

The company on Tuesday announced it's purchasing 270 Boeing and Airbus aircraft, which it said was "the largest combined order in the airline's history and the biggest by an individual carrier in the last decade." United CEO Scott Kirby said that "everything we see, every day, tells us that business and international travel will ultimately come back 100 percent" after the airline industry was hit hard by the COVID-19 pandemic, Axios reports. According to The New York Times, with existing orders, United will now be adding over 500 planes to its fleet, though "about 300 of the new planes will replace smaller jets." 

This was a "significant bet on future growth" when business and international travel hasn't bounced back from the pandemic, Axios wrote. Indeed, The Wall Street Journal writes that United's plans to "boost international flying are a bet on travel at a time when the outlook is still uncertain," and analysts noted that "business travelers who would typically fill the more expensive premium seats have yet to return and travel patterns could remain in flux for years," per the Journal. In April, McKinsey analysts estimated business travel will "only likely recover to around 80 percent of prepandemic levels by 2024." Similarly, the Atlanta Journal-Constitution reports business travel recovery is lagging far behind leisure travel, which is problematic given that business travelers previously made up 30 percent of airline trips but about 50 percent of passenger revenues.

But Andrew Nocella, United's chief commercial officer, said that "the resistance to traveling for business is rolling back quickly," predicting "next summer, travel across the Atlantic is going to be an absolute record-breaker," per AxiosCNN also notes that United is likely getting "a significant discount," and Bank of America analyst Ron Epstein told CNN, "It's a sign that United is a savvy airplane buyer. I'm certain they're getting a good deal on Max's. But if they didn't feel reasonably good about the return of market for flying, they wouldn't be doing it."