MIAMI — Delta just can’t stay out of the news this week. The Atlanta based carrier placed a long rumored order today for forty new Airbus aircraft at a list price of $5.6 billion (though after likely discounts the actual value of the deal is unknown). Broken down, the order consists of ten Airbus A330-300 wide-body aircraft and thirty Airbus A321 narrow-body aircraft. The order is meant to bridge a gap in long haul capacity as well as to retire older, less efficient frames such as the Boeing 757.
The wide body portion of the order is not terribly surprising. Delta had been discussing expansion of their wide body fleet for some time now to bridge a gap in capacity after pushing back delivery of their Boeing 787s into 2020. The carrier had been predictably debating between the Airbus A330 and the Boeing 777, both of which they presently own.
Delta will also be the first to operate a newer, slightly upgraded A330-300 – a 242 metric ton version- that will enable them to see additional gains in range and payload. The aircraft will be configured to seat 293 passengers in two classes. The first of ten are expected to be delivered in 2015.
The order for thirty Airbus A321CEO (current engine option) comes as a bit of a surprise. While the airplanes are able to replace DLs aging fleet of 757s, the carrier already has 100 of the A321s main competitor – the Boeing 737-900ER – on order. In fact the first Delta 739ER is due to be delivered in November 2013.
Yet at the same time the A321 beats the 737-900ER on a CASM (cost per available seat mile) basis excluding finance costs, and it’s quite good for trunk routes in the US (case in point, both jetBlue and American also ordered the A321 specifically for trunk routes in the past year). Each jet will be configured to carry 190 people across two classes. The carrier will begin to receive the jets in 2014.
“Ultimately, the Airbus economics on this transaction were the best for us.”
While others have raced to buy the newest, most fuel efficient models the moment they hit the shelves, DL passed; opting instead to upgrade its existing fleet. Example: while other carriers have been shedding the Boeing 747 like there’s no tomorrow, Delta recently finished a huge cabin renovation across all sixteen jets. The same is being done on their 767s as well as the thirty-two A330s the carrier already owns. They recently picked up used Boeing 717s from Southwest/AirTran, along with MD90s from China Southern.
And while today’s order reverses that course to a degree, the decision to choose current, largely proven models (A330 with minor upgrades, A321CEO vs NEO, 737-900ER vs MAX) underscores the carriers more conservative fleet approach. Delta CEO Richard Anderson, talking with Reuters back in May of 2013, stated that “[Delta] would rather see proven products that have cash-on-cash returns from the moment we take delivery.”
In addition, utilizing the older models also gives the advantage of better build slot positions – thus solving their growing need for capacity sooner rather than later. Having signed up for a NEO or MAX would’ve pushed delivery dates farther into the future than Delta currently would like to have.
Delta would not confirm whether or not the order was meant to function as a replacement for existing models, or as a growth opportunity. It’d be fair to say, however, that given DL’s present utilization strategy they’re likely to keep older aircraft on tap well into the future, thereby making this order about extending options for the future rather than solidifying decisions today.
While Airbus is not new to Delta – they current operate several hundred airbus between the A319, A320, and A330 – they will be the first new Airbus that the company takes delivery of. Their current fleet was acquired via the 2008 merger with former Northwest Airlines. Going further back, Delta has operated various versions of the A310, but they were acquired via Pan Am’s demise. DL did at one point have their own order of Airbus in the early 90s, but cancelled them as the economy turned sour.
“The A321 beats the 737-900ER on a CASM basis”
-Airchive Senior Business Correspondent Vinay Bhaskara
The move comes as a blow to Boeing, which was also involved in negotiations. In particular a long standing ‘gentleman’s agreement’ – now broken – had existed between the two companies, in which Delta had exclusively purchased Boeing airplanes for years. While a Delta spokesman acknowledged that the deal could have gone either way, “ultimately, the Airbus economics on this transaction were the best for us.”
Meanwhile, over at Airbus the good news follows the recent delivery of its 1000th airplane. With Airbus creating the new 242 metric ton version, the freighter, and a regional version over the past few years, the type has received several new leases on life. Not too shabby for a twenty year old airframe.