United Airlines (NYSE:UAL) announced in November last year that it aims to cut its fuel costs by $1 billion annually by 2017. Recently, the carrier announced that it took a key step towards achieving that objective. Earlier this week, United completed the installation of a newly designed wingtip curved extension, called split scimitar winglet, on one of its Boeing 787-800 aircraft.
Conventional curved extensions on aircraft wing tips, that are shaped upwards, reduce fuel consumption by lowering drag on the airplane from the surrounding air. This new split scimitar winglet installed by United has an additional curved extension which shapes downward. This new design promises additional fuel savings compared to the conventional upward-shaped extension. United says that savings from this new winglet will enable it to save $200 million in fuel costs per year once its entire fleet of 737s, 757s and 767s is outfitted. 
United is the world’s first carrier that is installing these new winglets on its aircraft. Alaska Air Group (NYSE:ALK) and Southwest Airlines (NYSE:LUV) are the other US airlines that have placed orders for this new winglet technology from Aviation Partners Boeing (APB) – developers of this technology. United installed the new split scimitar winglets on its 737-800 after the Federal Aviation Administration (FAA) approved its technology.
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We currently have a stock price estimate of $46.57 for United, approximately in line with its current market price.
Split Scimitar Winglets Improve Fuel Efficiency
The conventional upward-shaped winglet reduces fuel consumption by an estimated 3.5-4% per aircraft on long haul routes.  This new winglet design promises an additional saving of 2% in fuel consumption, according to United.  We figure installation of this new winglet will play a crucial role in enabling United to cut its annual fuel costs by $1 billion within the next four years.
Separately, apart from increasing fuel efficiency through these new winglets, United is reducing its fuel costs by replacing old, aging aircraft in its fleet with new, more fuel efficient ones. Read here about how United is improving its results through cost control and ancillary growth initiatives.Notes:
- United Airlines is the First to Fly with New, Fuel-Efficient Split Scimitar Winglets, February 19 2014, www.unitedcontinentalholdings.com [↩] [↩]
- Meet United’s New Fuel-Saving ‘Split Scimitar’ Winglets, February 18 2014, online.wsj.com [↩]