Delta defers 787s to the next decade

FA Mikey

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Delta Air Lines Inc., the world’s second-largest carrier, reaffirmed its order for 18 Boeing Co. 787-8 jets, while deferring deliveries into the next decade.

Delta and Boeing reached the agreement to defer the planes until 2020-2022 in the quarter that just ended, the airline said today in a regulatory filing.

Northwest Airlines Corp., which Delta bought in 2008, was to take deliveries of the 787 Dreamliner planes between 2008 and 2010, and Delta has repeatedly said it was in ongoing discussions with Boeing about the matter, leading some analysts to speculate that it might cancel the order.

“I’m kind of surprised” Delta kept the order, said Richard Aboulafia, a fleet analyst at consulting firm Teal Group in Fairfax, Virginia. “Then again, how meaningful is a 10-year deferral? A lot can change in 10 years. Maybe Delta did this for contractual reasons. Maybe they didn’t have walk-away rights. Maybe they’re still examining the issue and had to say something by a certain time.”

Boeing has delayed the plastic-composite Dreamliner’s entry into commercial service six times, until 2011’s first quarter, after planning a May 2008 debut. The first U.S. customer for the 787 is scheduled to be United Continental Holdings Inc., which plans to begin flying its first plane in November 2011. AMR Corp.’s American Airlines expects deliveries of the 787-9 version in 2014.

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Personally, I see this as a mistake unless there are provisions to accelerate the delivery schedule if desired. I understand what DL is saying about having enough trans-ocean airplanes now, but the oldest 767's will be over 20 years old by 2020, 7572's 25 years, and 330's approaching 20 years.

Jim
 
If Wikipedia is correct, DL only has 34 airplanes on firm order. 18 of these are the 787s, 8 are used MD-80s and 1 is a used 757. The remaining 7 are A319/A320s inherited from NW.

Has there been any word on whether DL will continue building the A319/A320 fleet or are all new narrowbody orders staying with the 737-700/800? I wonder, now that DL can see how both fleets perform, is one is showing to be more cost effective than an another. DL has a large MD-80/MD-90 fleet that will at some point need to be replaced over the next 8-12+ years.
 
Has there been any word on whether DL will continue building the A319/A320 fleet or are all new narrowbody orders staying with the 737-700/800? I wonder, now that DL can see how both fleets perform, is one is showing to be more cost effective than an another.
Supposedly the Boeing is a little more efficient, although I guess the cost of the planes would have to be figured in - I'd imagine that NW got a good deal from Airbus. If Airbus decides to re-engine the little Buses, that could even things up if it results in the efficiency gain claimed.

At one time, DL/AA/CO and Boeing had exclusive contracts - the three carriers would only buy new planes from Boeing and get perferential pricing, order/delivery flexibility and some other things in return. Airbus complained so the exclusive supplier relationship was dropped, although with a wink and a nod - none of the three have ordered a new mainnline plane from anybody else since. Obviously the DL/NW and CO/UA mergers have changed things with NW and UA having/getting little Buses and NW the A330 - the question is whether the "gentlemen's agreement" survives intact.

Jim
 
Supposedly the Boeing is a little more efficient, although I guess the cost of the planes would have to be figured in - I'd imagine that NW got a good deal from Airbus. If Airbus decides to re-engine the little Buses, that could even things up if it results in the efficiency gain claimed.

At one time, DL/AA/CO and Boeing had exclusive contracts - the three carriers would only buy new planes from Boeing and get perferential pricing, order/delivery flexibility and some other things in return. Airbus complained so the exclusive supplier relationship was dropped, although with a wink and a nod - none of the three have ordered a new mainnline plane from anybody else since. Obviously the DL/NW and CO/UA mergers have changed things with NW and UA having/getting little Buses and NW the A330 - the question is whether the "gentlemen's agreement" survives intact.

Jim
Jim you are pretty much right on. Dal does not want the 787 and never has. They will fly it at some point but not in the near future. The plan was to aquire fairly new 777 that were returned to Boeing by 787 custumers. This was to be a real steal because the aqusition price versus the operating price would pay for the airframes. Just like the MD 90... Dal gets 3 MD 90's for the price of one 737 800. The airplanes are low time and relatively cheap to operate. Boeing has offered Dal all sorts of compensation for the late 787 but Dal wants the money. That lowers the price on the 787 when they do get it. Boeing has offered everything from new 767's to used 747's but nothing that Dal needs or wants. The one thing that they are after is the 2 777's that remain from the Dubai leasing company colapse.
 
While I am surprised that DL is pushing back the orders so far, it really should not be surprising. DL undoubtedly had to do something with the 787 order now that Boeing is setting firm delivery dates for the orders NW had placed.

Remember also that DL now is fllying nearly all modern widebody types in production - there is very little value in adding another model which isn't delivering what Boeing promised when NW signed the order. Remember also that NW passed on ordering the 777 in order to retain commonality with the 330s which were deemed to be the best choice for NW's transatlantic system where the 330 is predominantly used. The era of twins over the Pacific has grown immensely and new hub overflight routes on both sides of the Pacific have grown quicklly since NW placed its 787 order and when the first 787s will ultimately be delivered.


DL said early on that the economics of the 787-8 do not favorably compare with the 767-300ER with winglets in terms of cost. The 788 is obviously a longer range airplane but it is still short of what it was intended to be. In addition, Airbus is offering a 332 performance package which extends the range of that airplane very close to the range of the 788. 772ERs are still very economical airplanes and they will become even more so as winglets become available for them. And there are plenty of used copies of everything in DL's fleet avaialble for less than what DL would spend on new aircraft, even considering the fuel and maintenance savings of new aircraft.

Considering that DL has made deleveraging the balance sheet a major priority, adding on new financial commitments new is undoubtedly not what they want to do.

There is very little that Delta needs in new airplanes... and it also sends a powerful signal to Boeing that DL is not buying unless the product and the offer are very compelling. Given that the A350 should be proven and flying by the time the DL 787 orders are due for delivery, DL will have a very good opportunity to choose from new long range widebodies from both Airbus and Boeing.
Ultimately, it is very likely that DL will buy something from Boeing so these orders could end up converted to some other Boeing product. And once again if Boeing chooses not to accommodate DL's preferences, DL could either sell these planes at handsome prices (since DL will undoubtedly still be getting a decent price on these models) or it could snub its nose at Boeing and buy from Airbus... who still has yet to sell a plane to DL which DL has kept.

At some point DL will have to place some significant aircraft orders but for the next 5-7 years at least, it will likely be used and existing aircraft in the DL fleet.
 
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I thought that a while back I read where DL was very interested in the A-350WX more so than the 787? I could be wrong but I thought I saw it somewhere
 
I thought that a while back I read where DL was very interested in the A-350WX more so than the 787? I could be wrong but I thought I saw it somewhere
DL and UA as operators of large fleets of both A and B aircraft will make no preference for either one in their entirety in order to keep competitive pressures on both manufacturers.
The 788 is just too small for a small widebody and there is a significant premium baked into the price for new technology, a premium that DL does not feel is justified given that there are still other options to improve the efficiency of exsting technology aircraft which can be acquired at a fraction of a price.

At some point, the competition for a new DL widebody will likely be between the 350 and the 789... but Boeing is also determined to keep the 773ER fresh and it is a product which DL has been interested in.

Remember that with about 150 transoceanic widebodies, "only a few" of a model are not going to do much more than add fleet complexity. If the 350 delivers a new leap in technology and performance, then you will have true competition on which to build a new generation fleet. For now, the 787 is still not in commercial service and there is no way of knowing how well it will actually perform, esp. after the "new plane smell" wears off.

DL's primary interest right now is to improve its balance sheet and use its existing assets to the fullest extent of their capabilities. Given that the global airline industry is still evolving driven by mergers, it is probably prudent to wait and see how how technology and the industry shakeout before going down a road that will involve tens of billions of dollars of replacement costs just for DL's widebody fleet.
 
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