United Airlines Is Ready for Takeoff
United Airlines Spends $30 Billion to Grow its Fleet
United Airlines (UAL) recently placed its largest airplane order ever, contracting with Boeing (BA) and Airbus (EADSY) to purchase 270 new planes. United is buying 200 MAX jets from Boeing and 70 SE A321neos from Airbus in a transaction worth more than $30 billion, excluding discounts. The airline operator wants to replace the majority of its 50-seat planes and other small aircraft with the larger planes, which will enable the company to sell more higher-priced tickets.
The purchase order is the biggest the airline industry has seen since American Airlines (AAL) bought 460 aircraft from Boeing 10 years ago. It also signals that United Airlines expects demand for travel to continue to surge after more than a year of pandemic restrictions.
United Airlines Bets on Pent-Up Demand
When combined with orders United previously placed, the airline will have 500 new jets in its fleet in the coming years, increasing flying capacity by 4% to 6% per year. With the new planes, United will add close to 30% more seats on domestic flights and 75% more first-class seats. United said that 200 of the planes are for new flights, while 300 will replace aircraft which United is retiring.
The big purchase order comes at a time when business is improving for United after it lost more than $7 billion in 2020. The airline expects to be profitable in July—for the first time since January 2020.
United to Hire 25,000 Workers
In addition to placing a large purchase order, United plans to hire 25,000 union workers by 2026, increasing its headcount by more than 36%. As it stands, the airline has around 68,000 union workers. United plans to spread the new jobs out across its major hubs including Newark, San Francisco, Washington DC, Chicago, Denver, and Los Angeles. United and other airline operators have started hiring again after furloughing pilots and tapping government aid to keep workers on payroll during the pandemic.
After being battered by the pandemic, the airline industry is preparing for a massive uptick in travel in the coming years. They are pouring money into upgrading airplanes and hiring more staff, hoping for clear skies ahead.
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US Spending Surge Drives the Global Economy
US Trends Impact International Markets
The surge in spending happening within the US is spilling over into the global economy, driving increased investments from companies around the world. Businesses are welcoming the increased demand for goods, but this is driving commodity prices higher and creating shipping delays.
The US is playing the same role China did after the 2008 financial crisis when it became the driver of global economic recovery. China is still seeing strong post-pandemic growth, but that is expected to slow later this year. Meanwhile, Europe is facing a slower economic recovery than the US. The US is being propped up by $6 trillion in stimulus money, which consumers are spending at home and abroad.
Costs and Benefits for Nations Around the World
Some nations benefit from the increased trade. But at the same time, they face the risk of rising inflation, a stronger dollar, and bond yields that are higher. All of these factors can slow economic recovery. For example, the US dollar has been climbing since mid-June. To offset this, central banks in Brazil, Russia, and Turkey, have raised interest rates multiple times.
Emerging Markets May Suffer
For emerging markets, rising interest rates would increase the cost of borrowing money. Debt levels in emerging markets are already high, at over $86 trillion. On the other hand, if the Fed keeps interest rates low it could prompt central banks to tighten monetary policy to prevent potential bubbles, particularly in real estate prices.
The US economy is booming, which is having different effects on countries across the world. For some nations, the growth is a double-edged sword. On the one hand they are facing increased demand for their goods, but it is also resulting in supply-chain shortages and rising prices. It will be interesting to see how the surging US economy continues to impact the world in the coming months.
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Real Estate Prices Surge Amid Red-Hot Demand
April Prices Set Records
Home prices have skyrocketed to record levels amid low supply and red-hot demand. As of the end of April, the price for an average home in the US was up 11.6%—the biggest jump seen in 16 years. For some, the current real estate environment is reminiscent of the housing bubble of the mid-2000s. During this period, prices soared and then fell, which resulted in a period of foreclosures.
However, current housing trends are different from what they were during this period for a number of reasons. Most buyers in the market today are well qualified to apply for mortgages and can meet their monthly mortgage payments. During the housing bubble, speculators used speciality loan products to buy and flip homes.
Homes Selling Rapidly
Despite the increase in home prices, sales are happening at record paces. Nationwide, on average it takes about seven days after a home is listed for an offer to be accepted. In hot areas of the country including Kansas City, Columbus, and Cincinnati, homes are selling three days after being listed, on average.
Some areas like Austin, Phoenix, and Salt Lake City are seeing double-digit increases in home prices. Rents are also appreciating, rising 3% annually, marking the biggest year-over-year increase since March 2020. Austin, Memphis, Tampa, and Phoenix are seeing the most extreme increases in rents.
Prices Will Remain Elevated
With mortgage rates expected to stay low and demand among millennials forecasted to remain high, prices should stay elevated for some time. Even with builders adding more inventory, there is still a lack of supply. It does not help that this surge in demand is coming on the heels of a decade of underbuilding. As a result, homes are forecast to appreciate 11.8% through next April and end 2021 10.3% higher year-over-year.
Ever since the pandemic prompted an exodus out of cities, the real estate market has been booming. With interest rates still low and demand not abating anytime soon, it will be interesting to see how builders and homeowners respond.
Before you buy a home, refinance a mortgage, or remodel, check out this one-stop guide that helps you understand financing, calculate costs, and more.