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United Airlines closes in on large order for Airbus A321 narrowbody jets

A United Airlines Airbus A319 jet takes off from Washington National Airport in Washington

A United Airlines Airbus A319-100 jet takes off from Washington National Airport in Washington, U.S., August 9, 2017. REUTERS/Joshua Roberts/File Photo Acquire Licensing Rights

WASHINGTON, Oct 3 (Reuters) – United Airlines (UAL.O) was set on Tuesday to announce an order for 50 widebody 787 Dreamliners from Boeing (BA.N) and 60 A321 narrowbody jets from Airbus (AIR.PA), two people with knowledge of the matter told Reuters.

Boeing shares were up 2.2% in early morning trading, while Airbus shares were up 0.4%. Airbus, Boeing and United declined to comment.

Demand has rebounded for long distance widebody jets to meet international travel demand. Last month, Air Canada purchased 18 Dreamliners and Air France-KLM ordered 50 Airbus A350s. Since the pandemic, there has also been a rise in demand for narrowbody jets, especially larger models such as the A321, which has dominated the single-aisle market.

“You can a call it the great convergence towards the middle,” said Richard Aboulafia, managing director of AeroDynamic Advisories.

Weakening pricing power in United’s domestic market has sparked concerns about travel demand, reflected in airline share prices. The NYSE Arca Airline index (.XAL) fell 12% last month.

While travel spending has remained robust despite an uncertain economic outlook, analysts are not sure consumers will keep splurging on travel if the economy slips into a recession.

It was the second major aircraft purchase by United over the past year. Carriers have been placing orders with urgency as Boeing and Airbus backlogs have grown and as jet deliveries have been pushed out toward the end of the decade.

In December, United Airlines unveiled a huge order of 100 Boeing 787 Dreamliners and 100 737 MAXs to cope with demand as pandemic restrictions eased and to replace older, less-efficient aircraft.

At the time, the order sparked concerns about United Airlines’ balance sheet. The company has said it expects to take delivery of about 700 jets by 2032. The cost may reach $50 billion, according to brokerage Jefferies.

Some analysts have said new aircraft shortages due to a broken supply chain have spooked airlines into placing large orders for jets.

“There are a lot of older planes that need to be replaced. Airlines are locking in good deals now,” Aboulafia said.

Reporting by Valerie Insinna in Washington; Mehr Bedi in Bengaluru; Additional reporting by Tim Hepher and David Shepardson; Editing by Shounak Dasgupta, William Maclean, Bernadette Baum and David Gregorio

Our Standards: The Thomson Reuters Trust Principles.

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