Published - December 14, 2022 @ 11:53 AM (EET)

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In the biggest order by a US carrier for wide-body jets, United Airlines Holdings Inc. (NASDAQ:UAL) said it would buy 100 of Boeing Co.'s 787 Dreamliners with options to purchase an additional 100 737 Max jets.

The big order is a significant win for the plane maker following a streak of manufacturing and regulatory setbacks. Moreover, it comes as United returns to profitability after the pandemic's travel slump.

In August, Boeing (NYSE:BA) resumed deliveries of 787s after it had production and quality issues forcing the company to suspend shipments. Chief Executive David Calhoun of Boeing characterized the deal as a sign of confidence and faith in the plane manufacturer.

WHY IT MATTERS

The Dreamliners will replace Boeing 767s and some of United's Boeing 777s, while the Chicago-based airline said deliveries are expected between 2024 and 2032.

Substituting the decades-old Boeings with the new wide-bodies will help reduce maintenance and fuel costs and result in a more fuel-efficient and profitable fleet, executives said.

According to people familiar with the matter, the Dreamliner deal, worth $30 billion in confirmed orders, is a victory for Boeing over its European rival, Airbus SE, since both manufacturers competed for the order.

"United emerged from the pandemic as the world's leading global airline and the flag carrier of the United States," United CEO Scott Kirby said.

He added, "This order further solidifies our lead and creates new opportunities for our customers, employees, and shareholders by accelerating our plan to connect more people to more places around the globe and deliver the best experience in the sky."

NOW WHAT

Though United has been ambitious in restoring international routes and heading into new markets as pandemic-era travel restrictions gradually eased, investors are still trying to figure out what to think about the news.

On Tuesday, shares of United initially traded up over 3% before falling 7% on a more broadly volatile day for stocks.

Elsewhere, the airline industry has fared well so far in 2022. However, in times of inflation and a slowing economy, historically, travel stocks have suffered along with consumer confidence.

Based on 20 analyst ratings covered by Refinitiv, United Airlines is a Buy. (11 Buys, 6 Holds, and 3 Sells). In addition, the average price target of $52.68 implies an upside potential of 28.49%.