Delta in talks to acquire dozens of small narrowbody jets - sources

[FrugalFlyerv2.0]

The C-Series in is financial trouble and the Quebec has not given the first payment of two  of $500 million each.
 
Bombardier is in dire straights because of this plane.

 
They'll get their money.  They're Qubecers, they're still negotiating (i.e. blackmailing the rest of Canada).  And they know that the province of Quebec needs Bombardier.
 
http://montrealgazette.com/business/local-business/aerospace/bombardier-cseries-quebec-has-backup-plan-if-ottawa-says-no-to-1b
 
"Federal Minister of Innovation, Science and Economic Development Navdeep Bains on Wednesday acknowledged receipt of Bombardier’s request, which would have Ottawa match the province’s injection."
 
"The minister welcomed Ottawa’s intention to review the law that requires Air Canada to operate a service centre in three Canadian cities, including Montreal. As part of the deal in which Air Canada intends to purchase 45 CSeries planes, Quebec has agreed to waive its legal action against the air carrier for the maintenance of its aircraft here in exchange for a commitment to keep the CSeries in Quebec."

 

[FrugalFlyerv2.0]

Apparently price is a factor in the sluggish CSeries sales.  Commitments for 678 planes but only 243 firm orders.
 http://www.montrealgazette.com/business/bombardier+cseries+sales+hurt+planes+technology+says+delta+lines/11771160/story.html
 
"While the CSeries "fits a need," Bastian said price is a factor in whether the Atlanta-based carrier places an order for the 110- to 160-seat plane that is set to enter service by summer. Executives toured the CSeries in December."

 

[FWAAA]

Problem I see is that the CSeries price probably contains a lot of R&D recovery; the massive R&D for the 737 & A320 series has been spread across many thousands of airplanes while there are only 243 firm orders for the CSeries.

No wonder Boeing and Airbus can price their planes cheaply - much higher volume, enabling the R&D to be spread across many more planes than the slow-selling CSeries.

Lots of R&D baked into the prices of the 50-seaters and 76-seaters, but Boeing and Airbus weren't in those markets, requiring everyone to buy them from Bombardier or Embraer.

 

[700UW]

http://www.wsj.com/articles/bombardier-near-deal-to-sell-up-to-125-jetliners-to-delta-1460664819
 

Bombardier Near Deal to Sell Up to 125 Jetliners to Delta

 

[topDawg]

Funny that the blowhard who used to post here droned endlessly about how AA's massive refleeting orders in 2011 were ill-advised and that Delta's strategy of keeping its 757s and its MD-80s was clearly superior. However, over the last several years, DL has ordered A321s and 737-900ERs to replace many of its 757s and has ordered A330s and A350s to replace its 747s, and is now looking to replace its MD-80s. Only thing different is that DL dribbled out the orders piece-meal instead of ordering hundreds all at once.

Since MD-80s generally seat close to 140, looks to me like 738s are still the best replacements, size-wise. The MAX versions will likely provide additional fuel savings.

 I hope you can see the differences of what American is doing and what Delta is doing. 
 
American is replacing airplanes that don't come close to needing it. I can promise if Delta had almost 100 MD80s that were are really young like American does (from TWA) they wouldn't be parking them. 
Delta is replacing airplanes that are 30 years old. Some of the 757s are cycling out. 
On top of those key differences, Delta isn't taking on debt like a 16 year old guy with daddies credit card like our friends at American. So look at the way Delta is replacing its fleet then compare it to American and you can see his point(and so can wall street). I rarely agreed with him but what American is doing right now is exactly why they are so undervalued compared to Delta. 
 
 

Hmmm,  so  Del - DUH   wants to replace  main line crews flying md-80's with  BIG  RJ's  using  slave labor wages (crews) at DL's Regional carriers !   I hope DALPA takes those to A-holes the $$ 'cleaners'.

 Do you ever know what you are talking about?
 

Buying used aircraft at reduced prices is a win-win.  When new a/c cost 75 plus million for one, and you get say 3-4 used for under the 75 million is a no brainer.  SWA has purchased 84 used a/c so far and are still looking for more. They still cannot get enough a/c for the demands that are presently out there.  SWA has and is sending purchasers all over the world looking for any and all used 737's they can find.

 Used aircraft are being looked at for sure. 
 
but in a world where Boeing is selling 737s for 20 million it makes it hard not to get the new airplane. 
 

I think Delta ordered 100 737-900ER's, not too small of an order.

Delta has about 70 737-900ERs on order and has taken around 50 of them. Plus 43 321s on order (2 in the fleet), 18 787s, 25 350s and 30 or so 330(mix of CEO/NEO) and has taken around 5 333s. 

 

[USFlyer]

 I hope you can see the differences of what American is doing and what Delta is doing. 
 
American is replacing airplanes that don't come close to needing it. I can promise if Delta had almost 100 MD80s that were are really young like American does (from TWA) they wouldn't be parking them. 
Delta is replacing airplanes that are 30 years old. Some of the 757s are cycling out. 
On top of those key differences, Delta isn't taking on debt like a 16 year old guy with daddies credit card like our friends at American. So look at the way Delta is replacing its fleet then compare it to American and you can see his point(and so can wall street). I rarely agreed with him but what American is doing right now is exactly why they are so undervalued compared to Delta. 

 
Many of the MD-80s are much older, though, and keeping a small fleet of ex-TWA MD-80s around doesn't make sense.  In addition, were these newer MD-80s leased or mortgaged/owned?  If leased and the leases are expiring, then it makes even more sense to lease a different plane that fits better with the fleet.

 

[topDawg]

 
Many of the MD-80s are much older, though, and keeping a small fleet of ex-TWA MD-80s around doesn't make sense.  In addition, were these newer MD-80s leased or mortgaged/owned?  If leased and the leases are expiring, then it makes even more sense to lease a different plane that fits better with the fleet.

 
IIRC its something like 65 aircraft. That isn't a small fleet. 
 
also I believe most of the American fleet is leased (not sure on the US side but i remember Horton doing a lot of sale/lease backs.)
having said that MD80s are cheap. AA could re-lease them very easily 

 

[robbedagain]

LUS MD80s were retired somewhere between 2002 and 05 I believe     it was fairly close to when the F-100s went as well    I believe most of the Airbus LUS side are leased  but some may be owned...

 

[dash8roa]

Boeing is pitching a 737.5 MAX which will have more seats than the 737-7 MAX. A range of about 4000 miles to perhaps open new thin routes to South America and still retain the short field performance of the 737-700 series. I think this will have appeal in replacing the Mad Dogs having equal seating for DL,and AA. Might be good also for WN. Keeping the maximum seat count at 150 would require only 3 FA's and not 4 as do the 737-800's.

 

[eolesen]

Having 60-100 MD80's vs. another 60-100 737's is a no brainer.

The operational flexibility and efficiencies from having fewer types is pretty well proven by now.

Plus, TW's "young" MD80's are at least 17 years old right now -- the last deliveries were January 1999. Better to cut the leases now while they still have some second-hand market appeal.

 

[metopower]

Having 60-100 MD80's vs. another 60-100 737's is a no brainer.The operational flexibility and efficiencies from having fewer types is pretty well proven by now.Plus, TW's "young" MD80's are at least 17 years old right now -- the last deliveries were January 1999. Better to cut the leases now while they still have some second-hand market appeal.

I'm all in . AA should double down and run that balance sheet up. Why use an asset to its max.

 

[eolesen]

Not getting the concept of total cost of ownership I see...

Keeping an asset around just because it still has a usable life isn't necessarily enough reason to keep it.

What's the cabin training cost for having to keep more FA's certified on the type than will actually fly on the airframe?

What's the cockpit training cost of having to run pilots thru the schoolhouse twice, assuming the MD80 is a junior airframe?

What's the incremental cost of having to keep MD80 rotables & consumables around for a shrinking fleet?

What's the cost of staying current on all the AWD's around the MD80?

What's the schedule change cost of having to deal with seatmap changes when routes swap between a MD80 and 737?...


When running "an asset to its max" costs more than it is generating in revenue, it's time to park or replace the asset.

 

[FWAAA]

When fuel was $3/gal, the fuel cost savings alone of the 738s v MD-80s more than paid the lease payments on AA's new 738s. The maintenance savings on top of that were gravy.

Recall that CO parked its 10-year old 762s when the 787s arrived, despite nearly every Airliners.net teenager claiming that the 762s still had years and years of "useful life."

Since oil prices began their steep decline in mid-2014, the fuel savings of the new 738s hasn't been as dramatic, but those 738s will fly for 20-25 years, and fuel prices will probably recover long before they're worn out.

 

[metopower]

Not getting the concept of total cost of ownership I see...Keeping an asset around just because it still has a usable life isn't necessarily enough reason to keep it.What's the cabin training cost for having to keep more FA's certified on the type than will actually fly on the airframe?What's the cockpit training cost of having to run pilots thru the schoolhouse twice, assuming the MD80 is a junior airframe?What's the incremental cost of having to keep MD80 rotables & consumables around for a shrinking fleet?What's the cost of staying current on all the AWD's around the MD80?What's the schedule change cost of having to deal with seatmap changes when routes swap between a MD80 and 737?...When running "an asset to its max" costs more than it is generating in revenue, it's time to park or replace the asset.

You are right. I just don't get this business . That is why your airline is #1 in profits and has the best balance sheet around. Along with being the largest and best run airline .

 

[eolesen]

You are right. I just don't get this business . That is why your airline is #1 in profits and has the best balance sheet around. Along with being the largest and best run airline .

My airline does have a decent balance sheet, thank you. But it isn't AA.

I could care less about who is bigger, who has the best balance sheet, who is the largest, or who is the best run.

None of that has any more bearing on this than trying to split off on a Squirrel! tangent about labor.


It seems pretty obvious that AA came up with a business case for replacing the MD80's that met the CapEx spending thresholds from their finance department, and it looks like they were also able to convince banks to underwrite the financing for re-fleeting.

I guess it's possible DL has higher thresholds for CapEx. Or, maybe they're comfortable enough that their network can support having subfleets fenced off into island-style operations.

There are lots of different ways to run an airline. Just because DL does it one way doesn't make AA's way right or wrong.