Dec. 11, 2017, © Leeham Co.: Eyes will watch Atlanta (GA) this week, when the Delta Air Lines Board of Directors decides to award a big order for the re-engined Airbus and Boeing single aisle airplanes.
The Board meeting is believed to be Thursday. At stake: 100 orders and 100 options for either the Airbus A320neo or Boeing 737 MAX families.
I wrote about this last week. Here’s an update.
There are a couple of additional factors to consider that I did not discuss last week.
First is the 737 MAX 10. Although I alluded to how a Boeing win would be a boost for the MAX 10, I didn’t explain why because the reason was obvious: a new order from one of the US Big Three for Boeing’s newest airliner.
What I didn’t pontificate on is the mere presence of the MAX 10 in the 737 family line up.
When Delta last placed a single-aisle order, it was for the A321ceo. At that time, Delta wasn’t interested in either the MAX or the neo, sticking with end-of-line, highly discounted NG and ceo products. Delta previously ordered the 737-900ER. A “737-1000NG” didn’t exist.
In the competition baking off the MAX and neo, however, Boeing now has a directly competitive product to the A321. The 737-900ER, while always bid across from the A321ceo, simply was an inferior airplane. It has fewer seats and airport field performance is inferior.
The MAX 10 still has inferior field performance to the A321neo, but the seating is about the same. If the airport has a 10,000 ft or 12,000 ft runway, the MAX 10’s inferior performance doesn’t really matter.
Then, the question comes down to economics.
Boeing claims the MAX 10 is 5% more economical than the A321neo on seat-mile and trip costs. Airbus says its airplane is up to 10% more economical, depending on the configuration.
LNC’s independent analysis, normalizing configurations and specifications to there is truly an apples-to-apples comparison, concludes the economic differences are in the low single-digits, varying a little depending on whether the GTF or LEAP is on the A321neo.
There is no real advantage for either company on the economics.
Likewise, Airbus and Boeing each boast their airplanes are significantly more economical than the competitor’s aircraft.
Our analysis (and that of others, by the way) shows the differences are, once again, in the low single-digits.
As one of our colleagues likes to say, there is “economic indifference” between Airbus and Boeing.
So, most deals—and this one—come down to commercial terms, all other things being equal.
But as I noted last week, there is the “C Factor” involving Boeing. Its trade complaint about the Bombardier C Series order by Delta, in which the US Department of Commerce preliminarily levied a 300% tariff on importation of the C Series, muddies the waters.
While Delta and Bombardier argue that the subsequent deal in which BBD sold Airbus a 50.1% stake in C Series and the airplane will be assembled in Mobile (AL) renders Boeing’s complaint moot, Boeing counters that this is mere “circumvention” to avoid the tariff, subject to its own penalties. Boeing also argues that “partially assembled” airplane parts (like wings, fuselage sections, etc.) imported would still be subject to tariff.
Unless the US International Trade Commission agrees (or concludes no harm was or will be done to Boeing) in its pending ruling due in February, only appeals will determine the outcome. These, of course, will take years. There’s no guarantee the US ITC will find “no harm” or the case is moot and there’s no guarantee Bombardier and Delta will prevail on appeal if ITC rules against them.
As I noted last week, the question is whether Boeing offered to drop the complaint in exchange for the order or Delta demanded it be dropped. While some suggest that any Boeing offer would be illegal (citing “blackmail”), I don’t look at it this way.
It’s not at all uncommon that parties agree to settle or drop a lawsuit as a condition of some new deal. I don’t see the difference here.
Airbus, of course, has nothing to offer Delta on this issue. Boeing, or Delta, have this card to play.
Last week I also raised the issue of Delta’s potential concern of a customer backlash in Seattle, home of Boeing Commercial Airplanes, should it buy Airbus. Delta is building a hub here in competition with Alaska Airlines, a heretofore exclusive operator of Boeing aircraft. (Alaska’s acquisition of Virgin America, an Airbus operator, muddies these waters for now.)
What I overlooked was the Trump Administration’s Buy America push (albeit, one he and his family don’t adhere to in their own businesses).
Although US airlines are “deregulated,” in that they can set routes, fares and fees without government approval, they are still subject to a myriad of federal regulations and approvals. International route authority is still a federal purview. FAA regulations (and inspections) are another.
One can just imagine if Delta buys Airbus. Notwithstanding the fact that many (or maybe all) of the A320neos might be assembled at the Mobile plant in deep red Alabama that loves Donald Trump, Boeing has remarkably and successfully kissed up to Trump and massaged his ego to no end. Boeing CEO Dennis Muilenburg didn’t take a strong stand about Trump’s Charlottesville (WV) remarks basically endorsing white supremacists. Several CEOs on Trump’s Business Council quit in protest. Not Muilenburg.
When it comes to Boeing vs Airbus in Washington (DC), and especially the White House, Boeing has the advantage.
Those I’ve talked to in the market think that on the merits, the choice between Airbus and Boeing is a coin toss. But throw in Trump’s Buy America and the C Factor, those I’ve talked to think Boeing is more likely to get the nod than Airbus.
It all comes down to the Board of Directors. We should know the answer by the end of this week.
I get the feeling that Delta has the whip hand here. Boeing has a massive vested interest in unravelling the legal case. It has got completely out of hand and surely senior management see this.
Curiously Airbus could also be argued to have a vested interest in resolving this dispute without it dragging on. The loss of 100 A321s is a large price to pay but they can sell those anywhere. The only possible downside is that Delta becomes a MAX operator into the future.
Delta needs the case to go away and can make Boeing bleed profit in the process
” It has got completely out of hand and surely senior management see this. ”
Brewing. But full Blowback is many quarters away. Ergo no pressure to reconsider. Years later they will again lament that they are disadvantaged ( self afflicted? nah never ) and need help for leveling the tables.
It is fine and reasonable to resolve pre-existing issues as part of a deal but often these issues will be either unrelated to the deal or genuine or both. Switch that to directly related and (to a majority of observers) not genuine and you’ve got what to me, ethically speaking, would be clear blackmail. Of course, maybe not legally speaking….
Any chance Delta will go with a split? Perhaps use the %s to make a statement, so 60-70% Airbus, remainder Boeing.
I am asking the same question, but with something closer to a 50-50 split.
With big decisions like these sentiments should not play a role. It’s a major one and sure a decision will be made that is in the best interest of DAL, if its within a 5% margin (in my companies case) you can take a “personal” decision/judgement.
I recall DL did similar before re narrowbody when they placed orders for
321Ceo x100 along with 739ER x100 separated only by a short interval.
“It’s not at all uncommon that parties agree to settle or drop a lawsuit as a condition of some new deal. I don’t see the difference here.
Airbus, of course, has nothing to offer Delta on this issue. Boeing, or Delta, have this card to play.”
I agree this is a very interesting situation looking at everything that is under consideration. The default would be to just do a bunch of A321NEO’s, the no-brainer everybody seems leaning towards.
The 737-10 is intriguing. What if Boeing does a real good job on the main landing gear, improving airfield performance better than expected. CFM does something smart with the LEAP and Boeing finds a reason to call back the DoC of the CS100 order.
This is Delta/NWAC, they probably will have their cake and eat it too. This is strategic for Boeing.
Delta has a huge aging 757/ 767 fleet, so this might go a little further too.
APEX could finally prevail if the financials compare down to a low single digit and if C-factor resentment at Board levels balances out vs Buy American hype. And when things are boiled down to purely APEX considerations (Boeing cannot conjure away those 6″ of cabin diameter missing in the MAX), Delta will naturally select the A321 NEO, the scales tipping frankly over when adding on the tacit fascination of an A322 being hatched closely downstream that Leahy keeps luring up his sleeve ?
A Boeing win would be a huge vindication of their Bombardier approach, of the DC politics dynamics, and of the $$ concession size to Delta.
In no way do i see Boeing dropping the BBD suits. Too much loss of face. Their board would not allow that. Neither would the DC dynamics. Not a chance.
Interesting to see Scott now coming more and more clearly pointing out the cognitive dissonance sometimes demonstrated by our administration’s head of state.
The most interesting almost neglected part of the BBD law suit is IMO that Boeing doesn’t offer a competitive product to those CS100’s they block using the Trump government. I wouldn’t worry to much for additional loss of face.
Face is all that seems to matter these days in DC.
DC is by far the more important Boeing customer.
Way beyond Delta.
It can be really complicated and interesting. DAL buys some 737-10MAX’es to keep Boeing quiet, Boeing drops the C-series complaint, DAL also lauches the A322 for delivery in the 2020’s as new Engines initially for the 797 are certified in addition launches the CS500 to be built in Mobile to replace the A319’s and 737-700’s . Boeing will get confused and but the burner onto the 797 development program.
Never say never, but Delta has shied away from launch orders. I think the A321neo makes sense, as DL has continued to top up 321ceo orders.
More in the ‘hope’ category, the 321neoLR would make a superior 757etops replacement. The 757s are very long-lived, but will eventually need to be replaced by DL, and I am not sure the max10 has what is needed JFK-CPH or PIT-CDG (paxEx for sure, but I have also performance questions)
I think the A330-200 might prove a little too capable for the NMA role. Airlines love its flexibility to to do medium routes in combination with opening up new long routes (Asia) with good cargo potential to support.
wrong post 😉
… True, but not pay-walled. I have done the same.
According to Reuters, Delta plans to sell some if its CSeries to Aeromexico, of which it holds 49%, in order to avoid the 300% duty. Might as well happen that DAL buys from Boeing and increases its CSeries order. Boeing drops the case, Airbus/Bombardier win a big order, Embraer loses.
I think Embraer has close 800 orders, LOI’s, commitments etc. for the E2’s, 1400 E jets in service. Little competition around 100 seats. They’ll be fine, they have a strong niche.
233 firm orders for the E2 series. 100 of those (and all the 175s) are for SkyWest, another 50 for ILFC. Five airlines with smaller orders.
I hadn’t looked at this in a while, I’m actually surprised that it’s only 233 from seven customers, when the much-denigrated CSeries order tally shows 360 orders from 17 customers.
“With these announcements, the E2s have accrued 285 firm orders, in addition to 445 options, purchase rights, and letters-of-intent, totaling 730 commitments from airline customers and leasing companies.”
I take options and commitment of Embraer AT Least as serious as those 360 of Bombardier (incl. Delta?), based on a 10 yr track record from both sides.
“I take options and commitment of Embraer AT Least as serious as those 360 of Bombardier.”
But what about options+commitments BEYOND the 360 firm in the CSeries backlog?
Or options & commitments @ EMB are somehow more “serious” than @ BBD by your book/personal preference?
I could be wrong, but I think Airbus has this one in the bag. I think Delta is pretty ripped about the whole C-Series debacle ….
“If the airport has a 10,000 ft or 12,000 ft runway, the MAX 10’s inferior performance doesn’t really matter.”
So the question is what routes does Delta like to operate in the future. To South America hot&high performance might be an issue.
Also the close to 50% stake in Aeromexico may force Delta to order better performance for this investment. Forcing an A320 on Aeromexico may be painful for someone else. On the other side Aeromexico in mind a good 737 deal is OK.
The question is, how many airports on Delta Routes have 10,000 ft runways?
Big ones of course, but Charlotesville?
Charleston WV etc?
The only runway at Albermarle airport (CHO) near Chalottesville, VA is 6,801 feet long.
The only runway at Yeager airport (CRW) near Charleston, WV is 6,802 feet long (yes – one foot different from CHO, not a typo).
Both, as you suggested, are pretty short by major carrier standards.
According to Delta’s 12-1-17 to 1-15-2018 master schedule, Delta and Delta Connection serve both airports with the following service. As usual with Delta, the type of aircraft used varies with day of the week and time of day to make sure thatth e sin of empty seats is not committed.
CHO: Non stops to any city you want, as long as it is Atlanta or New York LaGuardia.
CRW: Non-stops to any city you like, as long as it is Atlanta.
CHO-ATL: Typically 6 flights a day flown with CRJ-200”s, CRJ-900’s or 717’s. The 717’s are used only for early AM flights, the rest of the day is CRJ’s.
CH-LGA: One morning flight a day, using CRJ-200’s or CRJ-700’s.
CRW-ATL: Approximately 5 flights a day using CRJ-200’s, CRJ-700’s, CRJ-900’s, A319’s, or 737-700’s. The first flight in the morning is the only one for which A319’s or 737-700’s are used (but not every day), the rest of the day is CRJ’s.
Here are the seating capacities Delta has installed on the various equipment they use at CHO and CRW.
CRJ-200: 50 seats
CRJ-700: 69 or 70 seats.
CRJ-900: 76 seats
717 : 110 seats
737-700: 124 seats
A319: 132 seats
Unless Delta changes very drastically the way it does things, it seems to me pretty unlikely that they have any attention of using 180 to 200 seat aircraft like 737-900 ER’s, A321’s, or 737-10’s at small short field airports like CHO and CRW. Certainly it is not what they are doing now.
AP: Great data.
That is what makes it hard to assess just the tech end, how any of it fits in a given carriers route setup.
“…pretty unlikely that they have any attention of using 180 to 200 seat aircraft like 737-900 ER’s, A321’s, or 737-10’s at small short field airports like CHO and CRW. Certainly it is not what they are doing now.”
That’s why I was scratching my head when I 1st read TransWorld implying lack of takeoff performance of Max1o @ Charlotesville and Charleston….
OT: Is the SHARP ( SHort AiRfield Package ) modification available for A321 too?
Regarding the issue of taking into account hot and high field airfields and short runway airfields in an airline route system when making fleet decisions, if such airfields account for a small percentage of the airfields in an airline’s route system, should an airline require that its entire fleet be able to serve the hot, high and shortfield destinations, or should it acquire a small subfleet to service the hot, high and shortfield destinations? It seems to me that both Delta and Southwest have selected the small subfleet option for their 737 fleets.
According to Wikipedia, Delta currently has in service 10 737-700’s, 77 737-800’s, and 87 737-900ER’s with another 43 on order. The 10 737-700’s apparently suffice to handle all the hot, high, and shortfield routes that Delta desires to serve with its 737 fleet. When short field performance is not required , the 737-800’s and 900ER’s are more economical.
According to Wikipedia, Southwest airlines ordered 170 737-8’s (with12 currently in service), and 30 737-7’s. Apparently Southwest believes this mix of 737-7’s and 737-8’s will be able to handle all its hot, high and short field needs. When hot, high or short field performance is not required, the more numerous 737-8’s are more economical.
I don’t claim comprehensive knowledge of Delta’s current scheduling or how they may wish to change it in the future; however, I do know that when I am out flying around the US on Delta about once a month, it presently seems that larger single aisle aircraft get used mostly between hubs and major airports that almost always have lung runways.
For concreteness, and to check if my impressions were true, I took a look at Delta’s current master schedule. The schedule had 21 cities whose name started with A, B or C that had non-stop service from Delta’s Salt Lake City hub on Delta or Delta Connection. Of these 21 cites, only 5were served by narrow body aircraft with 180 or more seats, as follows.
Atlanta (Major Hub): Served by 737-900ER, 757-200, 757-300, A321-200 as well as A330-300.
Boise: Mostly E-Jets, CRJ’s and MD90’s, but gets one flight around Christmas with a 737-900ER.
Boston (Hub): mix of 737-800’s and 737-900ER’s.
Bozeman: Mix of CRJ’s, E-Jets, A320’s, 737-800’s, and 737-900ER’s.
Cancun: A320’s, 737-800’s, and 737-900ER’s.
A 737-10 should be able to operate any route that is presently operated by a 737-900ER?
Large cities such as Baltimore, Cincinnati, and Chicago, get nothing larger than a 737-800. Only Amsterdam and Atlanta get wide bodies.
10k or 12k runways also puts DCA & LGA at a disadvantage for any “beyond perimeter” trips originating at the former, and whatever “wink, wink” quid pro quo changes at LGA in the future to amend in some form, or completely eliminate, the existing 1,500 miles perimeter rule there that surely must have been included with the agreement announced earlier this year by Governor Cuomo and Delta for its $4+ billion part of Cuomo’s long sought signature, and showcase, transformation of LaGuardia from a “Third World” airport travelers loathe, to a modern masterpiece befitting NYC…
…now, if only someone could figure out a way to talk Cuomo of out flushing money down the toilet on a useless AirTrain from Flushing Meadows (adjacent to Citifield and the National Tennis Center where the US Open Championship is staged that will take longer, cost more, and still require a transfer along the way using separate networks at platforms than the existing subway or Long Island Railroad/bus connections) nobody in the city actually wants, and instead turn him on to a real, one seat subway ride via a nearby line like REAL CITIES around the world have, we’d really be set to have a world class airport – even if its barely 7k intersecting runways are hardly optimized for any 737-10 Maxes Delta, or other airlines, may buy…😉
“So the question is what routes does Delta like to operate in the future.”
I would imagine Max10(or 321Neo) in DL fleet will be mostly deployed on domestic trunks between DL hubs/focus cities +HNL like how they use 752 domestically today. Each of these airports is equipped with @ least a pair of 3,000m class or longer rwys.
“To South America hot&high performance might be an issue.”
But non-issue for 320Ceo/738 today and DL can include 320Neo/Max8 in the current firm order or options….
“Also the close to 50% stake in Aeromexico may force Delta to order better performance for this investment.”
But U forgot:
1. All rwys @ MEX hub are well over 12,000ft long.
2. No routes between any DL hub and AM hub/focus city is near 2,500nm while Max10 is nominally rated @ 3,200nm+ @ full pax load. Therefore, a Max10 heading to a DL hub fm any AM airport will take off @ well below MTOW even @ full payload. As a result, actual takeoff roll distance required will be less than the 10,000ft~12,000ft quoted in the story.
3. Max10 is not the only choice for DL(nor AM) to commit to a Max family.
SLC has 12,000’ runways, but with the altitude it’s still not enough to preclude performance issues with the 737NG. Oh yeah, it’s also a DL hub. But I guess DL doesn’t really care whether its mainline aircraft can operate reliably from its hubs.
I often connect in Salt Lake City on Delta flights to visit family in Idaho, and my flights from Atlanta to Salt Lake City and back are on 737-900ER’s about half the time, and on 757-200’s or 300’s about half the time. Empty seats on these flights are pretty rare and the service has been very reliable. Don’t believe everything that you read on the internet, 737NG’s are very common at SLC not only with Delta, but many other airlines. Southwest flies there, and all they have are 737’s. Mr. Hamilton stated that if you had 10,000 to 12,000 foot runways 737-10 field performance would not be a problem, that is not the same as stating you must always have 10,000 to 12,00 foot runways for 737NG flights. Most 737 flights from SLC are domestic, and since SLC is about 600 miles inland from the US West Coast, this means that the distances covered on domestic flights will rarely be greater than 2,000 miles (SLC to ATL is 1,590 miles, SLC to JFK is 1,980 miles). This means that a 737 with a full passenger load, but only the fuel needed to make it to anywhere in the continental US from SLC, will be well below maximum takeoff weight, and very much able to operate out of SLC. Only if you are operating flights at the 737-900ER’s maximum range are you likely to need 10,000 foot runways.
In case you don’t want to believe me, go to the Delta website and check for flights from SLC to ATL one week from today (12-19-17). When I just did this, I found the following flights with seats available.
7:00 AM / Delta 2155 / 757-200
8:30 AM / Delta 1108 / A330-300
9:30 AM / Delta 2325 / 737-900ER
11:10 AM / Delta 108 / 757-200
2:20 PM / Delta 147 / 757-300
5:00 PM / Delta 1125 / 737-800
11:59 PM / Delta 1304 / 737-900ER
737-900ER’s are also used by Delta for SLC to JFK (1980 miles) and SLC to Orlando, FL (1930 miles). Here are the SLC to JFK and SLC to MCO flights that had seats available on 12-19-17 when I checked a few minutes ago.
SLC to New York (JFK)
8:25 AM / Delta 1632 / 737-900ER
4:56 PM / Delta 1830 / 737-900ER
11:50 PM / Delta 1202 / 737-800
SLC to Orlando (MCO)
9:54 AM / Delta 2624 / 737-900ER
10:45 PM / Delta 2603 / 737-900ER
According to the articles at the links below, current United Airlines President Scott Kirby, who was previously President of American Airlines, stated at an employee town hall meeting this year that United Airlines could not get competitive prices on Airbus single aisle aircraft because of a deal that American Airlines had negotiated with Airbus. If it is true that there is some such deal, could it be a factor in Delta’s current narrow body competition? The following quotes are from the first of the two links below.
“Airbus cannot give United Airlines a competitive price for new single-aisle aircraft because of a deal the manufacturer struck with American Airlines several years ago, United President Scott Kirby told employees recently in Los Angeles.”
“One of the challenges for us buying new airplanes right now is that Airbus did a deal with American — this was before I was there and before American filed for bankruptcy — where American paid a pretty rich price for airplanes,” Kirby said in a video for employees, a copy of which was obtained by Skift. “Airbus gave them a most-favored customer clause, meaning if they give anyone else a lower price, they have to write a check to American to give American retroactively that price. Airbus just can’t give us a competitive price today.”
The quote below is from the link after the quote.
“Some aerospace analysts were puzzled by this statement. After all, Airbus has sold thousands of A320neo family planes since announcing the American Airlines deal. It has also sold over 100 A321s to Delta Air Lines (American’s other main rival) at bargain prices. Furthermore, it seems odd that Airbus would have agreed to terms that might seriously impair its sales efforts.
One possibility is that the most-favored customer clause only applies to new-engine aircraft rather than the current-generation planes that Delta has bought recently. It also could apply only to U.S. carriers — and perhaps even just U.S. legacy carriers. The one detail that Kirby confirmed is that the most-favored customer clause expires eventually. (He didn’t say when.)”
I am puzzled that Scott Kirby is being quoted disclosing priviledged info – if correct ?? – supposedly accessed to in his previous position as CEO hence Attorney-in-Fact of AA (??) … the very existance of the alleged clause would – if disclosed by the Buyer – signify immediate relaxation i.e. warranting a waver to Seller as forthwith not applicable said clause ! I’m sufficiently familiar with Airbus’ salesware to propose that utter prudence must have guided the wording of such a ‘boomerang’ clause – again IF CORRECT ?! (which I doubt, with all due respect to AP)
“According to the articles at the links below, current United Airlines President Scott Kirby, who was previously President of American Airlines, stated at an employee town hall meeting this year that United Airlines could not get competitive prices on Airbus single aisle aircraft because of a deal that American Airlines had negotiated with Airbus”
Either Kirby is publicly sharing the fleet strategy of UA and honestly disclosing to his employees of what is going to happen, or trying to get a better price on the aircraft his fleet development guys want.
Interesting, maybe that why UAL stayed in with the 350’s.
Think of UAL’s current/future larger single aisle fleet, >300 B737-900/MAX9/10’s. Maybe Mr.Kirby knows he has a challenge on his hands, if those were 300 A321’s live would have been much happier?
“..Mr.Kirby knows he has a challenge on his hands, if those were 300 A321’s live would have been much happier?”
Highly unlikely for any reasonably competent CEO who makes commercially rational fleet decisions.
However, pretty sure U would have been much happier purely because UA buy Airbus instead of Boeing despite someone commented earlier that “…With big decisions like these sentiments should not play a role…”……I forgot the name of that commentator.
More possible background info.
Mullenberg is an embarrassment period, let alone to people of German heritage.
Well, he claims that Boeing will get to Mars first.
That’s “a forward looking statement”, sure its important for the shareholders?
They could need it.
MARS returns used energy 🙂
I don’t buy that Delta is the least concerned about Seattle and Airbus connection (or Boeing favoritism)
A plane is a plane and its the fare that counts (and some leg room)
@TW You may not “buy” it, but a Delta official told me, so there!
Scott: Then I have to stand corrected (knuckle to the forehead and all that)
I bought a Passat Wagon because no one in the USA made anything remotely like it (Saturn would have been the last with their Wagon)
I had always bought US vehicles (granted trucks and UV of various types) – I liked simpler and could work on them.
So I have to put myself in the stunned arena that Delta would think its an issue if I am willing to go off the range as it were.
Next I guess they will have to buy some 787s despite sucking Boeing in on the A330/A350 bid thing that Seattle should long remember.
But then Trump got enough electoral vote to get to be POUTS so what do I know anymore anyway.
“I bought a Passat Wagon because no one in the USA made anything remotely like it”
Then I must be in a dream when I came across buick.com earlier this yr: http://www.buick.com/sedans/regal-tourx-luxury-wagon.html
Styling is obviously a personal thing but IMHO, that thing in my dream was less boring-looking than any Passat Estate/Wagon….
“I had always bought US vehicles (granted trucks and UV of various types) – I liked simpler and could work on them.”
Possibly seriously out-dated stereotyping. The latest gen U.S. branded vehicles like those directed-injected turbo Buicks possibly require someone with a software engineering degree to “work on them”…..
“Next I guess they will have to buy some 787s despite sucking Boeing in on the A330/A350 bid thing that Seattle should long remember.”
But they are already taking 787 deliveries(and may buy more thru existing options) via Delta U.K. a.k.a. VS. In the DL+VS Trans-Atl JV where 90%+ of the entire VS fleet is deployed, DL directly+indirectly own+control 74.5%.
In this day & age of this industry, there’re so many ways to skin the same cat(pardon my cliche’)….
Surely this compromises your ability to offer rides to those in the ‘America First’ camp. I hope it doesn’t impact on your economic model
Not sure about the 8 speed transmission and 2.0L engine? But you don’t have “hot-and-high” conditions to deal with.
I sent in my MAGA card a while back.
Ok, the Wagon was not a style choice though its about as good looking a wagon as you can find (I think). I like wagons, wagons are hard to find in the US (Toyota makes one in that class I think). All theyu want to do is sell you 4 WHD Cross over thingies.
The mission was to replace a UV (which is what they were listed as originally) with an economic machine that can do 80% or more of the missions (shades of a 787-10)
Also needed was much better fuel mileage (two vehicles that get 10 mpg around town not good)
So the Passat and the diesel. Its worked very very good. 30-32 around town and a to die for 40+ on the highway and it drives very nicely (my wife loves it and she was quite annoyed when she lost her Bronco in the transaction – if I try to sell this one and I am kaput.
Agreed new US cars are now equally complex, but I was into trucks and the two we had were 95 era, ergo you could not only work on them, simpler systems and you could get to them!
Agreed, no high nor hot (at least by US standards.
Still does anyone think Boeing employees after all the hammering and disrespect, moved out, etc. are that ardent about the company (we are talking most not all) that they could care less what they fly in?
I remain a skeptic .
At Scotts level I can see the PR spin but at a real working level where you get your hands dirty that I live at (sorry Scott) no.
We here in Europe know it as the Opal insignia and I think that it,the Buick version and the Vauxhall one are all made in Germany.
Simple brand perception problem.Easily sorted out with the Convair A321.
It would be sad if DL cares more about this nonsense than having an 18” wide seat. I can’t imagine either being very important to them, but at least the latter has direct benefits to the customer.
Air France and Lufthansa don’t seem to be concerned about Hamburg and Toulouse when buying airliners from Boeing. Why all this hoopla when US airlines are buying aircraft from Airbus?
You need to get a sense of the mess in DC to understand the “your wife’s ugly” twitter utterances power right now.
Will you risk your high compensation and ostracized by our evangelical friends being singled out (your wife’s actually… sorry — you get the metaphor, right?)
The economics must be solid to swim against that tide. Why would Boeing not flatter a bully if it gets them sales? $$ is odorless.
So that means we should all sell our respective countries out to the Ruskies?
Alternatively, may be to the Chinese.
The Beijing political industrial regime seems to hv more cash than they know what to do with than Moscow these days anyway.
Dang, I keep forgetting who has more money these days.
Sneaky Russians vs Rich Chinese. I guess I might as well take rich, money is good stuff to have.
“Why all this hoopla when US airlines are buying aircraft from Airbus?”
Or from BBD or from BBD+Airbus…
I strongly suspect this is because the current U.S. mkt/industry under Trump admin is ideologically far more protectionist than the EU mkt/industry. Furthermore, Trump admin trade policy is more protectionist because U.S. voters directly demand so whereas there is no such thing as EU voter re EU trade policy…..@ least not a direct equivalent.
FLX: I think in reality Trump is pure BS protectionism , as Scott noted, he has a big mouth but when you look at his operations its based on foreign made stuff and propped up by outside laundered money.
If Trump could make nickle on the deal he would (probably did) sell us out.
European, Japan and Chinese are practical, they use the country mechanisms to keep it out as best they can.
Don’t get me wrong, I think all countries are obligated (or should be) to keep their jobs as best they can.
Whats been stunning is watching the Reptilians (and the Dems) shuck all those jobs overseas.
Said jobs should be lost with as much kicking, screaming complaining and foot dragging as possible.
unable to compete on an equal standing. And that is going on for quite some time.
So you need table leveling action.
Like with any drug addiction sets in and takes hold.
so you are now have reached the equivalent of massively degenerative drug use: MAGA!
I do wonder how “Cold Turkey” will look in this environment. 🙂
Come on Uwe
Are you saying Boeing can’t compete?? They have some pretty strong placeholders out there and as an entity they generate solid profitability. I get the feeling it is less about being unable to compete on a level playing field and more ‘competing on all levels’, by product, service, politics, and more politics. The world seems to become more opaque the more information we have. Boeing seem to want to play the game on a more nationalistic basis. Can’t say it is that successful so far but maybe I am missing something
Regarding:” A plane is a plane and its the fare that counts (and some leg room)”
I would agree with you for just about any city other than Seattle. Boeing is still by far the Seattle area’s largest employer with about 80,000 employees, who have hundreds of thousand close family members and friends. There are many Seattle area politicians in whose district’s Boeing is the largest employer. Home town airline Alaska has “proudly All Boeing” painted on the side of their 737’s. I read that Alaska Airlines and United have contracted to start passenger service to a new terminal at Everett’s Paine Field, site of Boeing’s wide body plant. I wonder if Delta is interested in competing with Alaska and United there, and what percentage of passengers flying out of Everett will be on Boeing business, Boeing employees, or Boeing employee family members?
The second and third largest employers in the Seattle area are a military base Lewis-McChord) with 56,000 employees, and Microsoft with 42,000 employees.
These are the same Union employees that McNenary has groveling and whose jobs are regularly threatened? Moved ops to non union Charleston and other environs?
Our company has a bonus to bring in new bossiness.
I would no more recommend my company to someone than I would sell out to the Ruskies.
Only 2 gates at new passenger terminal at Everett/Paine Field
My personal view is that DL needs in the shorter term is more towards 160 seat capacity for single aisles.
My “wild-cart” is for a 100 MAX8 order with the 100 options for 321NEO’s (that could be converted to 321+/322’s?). Only time will tell.
Both DL’s and UAL fleets have 737-900/ER’s and or MAX9’s in it. Must say AA single aisle fleet much “cleaner” for me? The delay in the NMA guess does not fit in well with their long term strategy?
Actually I am in more anticipation of what AA is going to do with their A350 order, an important one for AB’s wide aisles.
“Must say AA single aisle fleet much “cleaner” for me?”
“Cleaner” fleet = better fleet for an airline? Amazing fleet decision logic….
Let me expand your logic a little further in this scenario:
For a ‘cleaner’ worldwide fleet, all narrowbody operators fm now on should switch to 320Neo family only and Boeing will close down 737 line including Max to abandon narrowbody mkt completely(so no Y pax will suffer fm the 6in narrower 737 cabin ever again) and drop 797 concept altogether(so no one will threaten any sales of the hypothetical 322/323).
That must be the most beautiful & happy dream world of commercial aerospace mkt for U…..
AA will be operating MAX8’s and 321NEO’s after phasing out the 320’s, for me that’s a “clean” fleet with the two best aircraft in their size class.
Replacing 319’s is also due in a few years, that’s a less easy one. Some of the 319 routes could likely be operated by MAX8’s. The CS300 most likely the most fitting to replace 319’s but not ruling out MAX7’s if they can get it at UAL type prices?
At this stage the 797 is more hypothetical than an A322?
The reality is if you can keep a common fleet it pays dividends in real money savings.
Once you scale up maybe not so much.
Fewer types is better.
I heard somewhere said carrier slowly and low profile kind of ordered a few A321s (120) and did unconfirmed reservations. Its nothing. (Why can’t I select 8pt characters and grey font color?)
DL’s A330-900 orders is still “pending”, will this be part of a bigger picture decision?
The A339 orders are firm. Not a factor, @anton.
Thanks Scott, was under the impression that are/were part of Delta’s review of their wide body orders/fleet evaluation.
That was a review of delivery schedule only.
Thanks again Scott.
Was wondering about DAL’s plans for replacing aging 767’s. With the NMA EIS likely 7+ years away they must be looking at 332/8’s, 788’s and 763-“Revive”.
According to Wikipedia they have the largest fleet (91) of in service 767’s. (AA and UAL coincidentally 91 combined).
When I just checked Wikipedia, I found the following information in the Delta Fleet page.
767-300: 2 in fleet, scheduled for retirement in 2018.
767-300ER: 57 in fleet, select aircraft to be retired beginning in December 2017, older aircraft to be replaced by A330-900neo and A350-900.
767-400ER: 21 in fleet, to be retrofitted with Delta One Suites in 2018.
By my math I get a total of 2 + 57 + 21 = 80 for 767’s currently in Delta’s fleet, rather than the total of 91 that you suggested.
I thought that the article at the link below has some interesting discussion of Delta’s 767 (and 747) replacement issues. The quote below is from the article, which was published in December 2016, several months before Delta announced a review of its Airbus widebody orders in 2017. People frequently forget here that lower per seat costs from larger aircraft only works if you can fill almost all the seats in the larger aircraft.
“Most of the remaining A350s — and all of the A330neos — will be used to replace the oldest 767s in Delta’s fleet. Delta currently operates 58 767-300ERs, with an average age of more than 20 years. Many of these planes will be ripe for replacement over the next five to seven years.
However, Delta’s 767-300ERs are configured with 208-226 seats, whereas the A350 and A330-900neo will both have around 300 seats in Delta’s configuration. That means adding a lot of capacity on any route where a new Airbus widebody takes over for a retiring 767.
This extra capacity helps the A330neo and A350 to offer 20% lower operating costs per seat than the 767-300ER. Yet Delta flies most of its 767s on transatlantic routes. The transatlantic market is currently flooded with excess capacity, driving down fares. Adding even more capacity there could drive unit revenue even lower, offsetting much of the unit cost savings.
It’s not clear yet how Delta will mitigate the potential unit revenue pressure from upgauging all the way from a 767-300ER to an A330-900neo. One possibility is that it will squeeze even more seats onto its A330-900neos to further reduce its unit costs.
Alternatively, Delta could place more premium seats on the A330-900neo, as it is doing with its A350s. This could help to differentiate its product from rival carriers and might work well in big markets like London and Paris. However, for other routes, there might not be enough customers willing to shell out extra for Premium Select or Delta One seats.
Lastly, Delta could consolidate departures. This could either mean flying fewer times a day with larger planes on busy long-haul routes or flying to some overseas destinations from fewer of its U.S. hubs. That would allow Delta to use more efficient aircraft without adding capacity to the market. The risk is that Delta could alienate customers by having fewer flight options.
There’s no clear “best” strategy for Delta. Any course of action has potential pitfalls. The choice of strategy could determine whether or not Delta’s widebody fleet renewal becomes a material earnings growth driver for the company in the next five years.”
Thanks AP-R, I found another more up to date summary on DAL’s fleet which is in agreement with your number of 80.
See the info that I used is dated July 2016.
There is a definite requirement for aircraft in the 200-250 seat market, but engine availability most likely the biggest stumbling block for a new aircraft.
Scott mentioned 2nd hand 330-200’s as bridging to a 797, maybe the opportunity for AB is to offer airlines/lease companies good “trade-in” deals on 332’s if they order 338’s.
A hypothetical A322 with larger wing (35-40Klb PW1100G2’s) and 4500-5000Nm range could find favor where airlines don’t need the twin-aisles capacity and 5000+Nm range on specific routes.
Engine is not an issue in the 200-250, its an air frame.
P&W has an engine design ready to go.
As for an A330-200, its all predicated on filling those seats.
If you only have 200 pax and 300 pax capacity, adding more seats going to 350 means you are carrying empty seats.
I won’t being to say I know how it really would or would not balance out.
767s had their place because they were under the A330 series.
Bigger engines cost more, parts cost more and they use more fuel.
How that balance’s out in cost, we need to see behind the curtain.
From my personal experience fuel saving is a gift that keeps on giving
While I am not directly in the Airline Industry, I have been involved in several large deals. Rest assured that people in such deals usually look into the wider impact as standard business practice, the pros and cons of AB vs BCA regarding Seattle operations, and Buy American, etc. should be a factor at least analyzed. Same will be for field performance and range and the options they have if they select the plane with less range. Of course they will know exactly, and they will use that to negotiate in both directions (BCA: Your plane does not have the legs so what can you do to make up for this – for example, throw in the same retrofits for the 737-900ER you promised United) AB: You have more plane than we need, if you dumb it down, what will be the price… etc.). So we can assume with operationg economics similar, deals like this will be more influenced by what additional value (sweeteners) each manufacturer has to offer plus possible external factors. So I think Boeing has quite a few interesting options in choosing the sweeteners, but will they throw in the ultimate (CSeries) one? Delta bought A330neo and A350 for TransPacific, so in that case the Seatle situation did not tip the deal to Boeing, and this may or may not be the case next time.
I can’t believe Delta would buy a Boeing product after what Boeing is trying to do.
If I were Delta, I’d turn around and ask BBD to develop the CS500…
I’m thinking this way probably because I am Canadian… 🙂
Well I am thinking that way and I am not Canadian !
I do thank you for being good neighbors and please bear with us in our time of travails, this too shall pass.
It would be sad to see Delta order the inferior 737 just political gamesmanship after Boeing tried to destroy the CS deal.
Can you imagine if the European airlines start ordering Airbus just because they would be afraid of the “optics”? Within 2 seconds, Seattle would start complaining about unfairness.
Airbus succesfully asking EU commision to block Embraer selling E190s to BA. Because Embraer might become a competitor in the future that Airbus can do without. And then BA ordering Airbusses instead of Boeings because they know Junker promised Euro jobs. EU first.
Yeah.. Don’t know what US opinion makers would write.. Just business I guess.
“It would be sad to see Delta order the inferior 737”
Inferior in what way? Certainly not for DL as a buyer as explained by this leehamnews story….
Inferior is somewhat twisted.
Its taken a lot of engineering effort to keep it viable, so Airbus with less cost input makes more money per bird.
Its a bit narrower though I don’t know I could tell the difference.
Cargo is less capable ad it can’t take containers but that assumes you use containers.
Amazingly its not economically inferior (or by much) so you ???????
The high floor on the 320 (just as in the 330/340, for the sake of containers) makes the effective width difference less than the nominal difference. That, and the somewhat bigger and more closely spaced windows on the 37 make the two a toss up for me as a passenger.
“… Trump’s Charlottesville (WV) remarks basically endorsing white supremacists.”
1. You mean to reference the Charlottesville in Virginia, not West Virginia.
2. This commentary is absolutely incorrect, despite it being the narrative of CNN, BBC, MSNBC, and the similarly-aligned. Trump did denounce the racial supremacists. However, on the issue of fault for the violence at this particular event, he opined that responsibility was shared between the racial supremacists and the radical leftists of “antifa.” Even the left leaning news institutions like WaPo reported it was clear that the latter initiated the violence, and signalled their intent to do so by showing up with weapons and masks. Was the racists’ response appropriate? No. But the whole thing wouldn’t have occurred had the ironically-named anti-fascists shown up to peacefully counter-protest instead of being intent on sparking mayhem. Within this context, anyone who claims Trump’s remarks on the assignment of blame for the mayhem being shared is tantamount to endorsement of the racial supremacists is making a tremendous logical leap. The virtues (or lack thereof) of the respective groups’ underlying ideologies is a separate issue, which Trump has properly and correctly addressed as such.
@Ben, I watched Trump’s initial statement. And then his second try. And then his third statement walking back his second statement. I drew my own conclusions. I appreciate your take; I had a different take and so did the CEOs who resigned from Trump’s business council.
Had to laugh, can’t even get a Republican elected in a deep red state (MARPIRA )
Hello Transworld, thought you were out buying the Buick with the BA dividends? Not anti-American but you should look at some Swedish options now that the winds of change are starting to blow.
I hope Boeing wins this one to even out the split in sales between it and Airbus. I also admire how much Boeing has been able to do with a frame about 50 years old and yet keep pace with Airbus.
In the end, price is what will be the primary issue in the decision.
Yea, having watched the 737 go from a cool short haul hot machine to a kludged up and modifies twisted out of its class and still be viable?
Either its the most fantastic engineering job since the Glomar Explorer and the Russian sub job or its a pathetic state of Aviation that the advances are so low that its still viable (all be with a tremendous amount of tweaking)
“I hope Boeing wins this one”
Neither outcome will make the slightest change/diff to how I or most folks buy & go thru short-haul air travel and that’s why I’m indifferent to who win.
“..to even out the split in sales between it and Airbus.”
Increasingly over the last 10yrs or so of observations in this industry, I see X product always maintain an edge over Y product in terms of mkt share whenever X offers more choices of propulsion manufacturer than Y.
I don’t see this mkt trend reversing in the future.
“admire how much Boeing has been able to do with a frame about 50 years old”
To be fair, less than 1/3 of the overall Max family design is technically anywhere near 50yrs old…
“In the end, price is what will be the primary issue in the decision.”
Which is part of Commercial terms and as Scott explained in his story, that’s the key factor in this DL fleet decision…..despite some commentators continue to insist other factors(e.g. X superior to Y) will be.
“To be fair, less than 1/3 of the overall Max family design is technically anywhere near 50yrs old…”
To be honest, they seem to advertise it as being quite similar to the original design in order to avoid having to comply with many recent certification requirements.
Whoever got the last big order should miss the next one owing to availability and because they need the work less.
@ Grubbie : Exactly ! And with the kind of backlogs MAX or NEO buyers are faced with from the airframers themselves, in their frenzy for capacity, availability talks … and Lessors are ready with interim capacity. The MAX10 line-up coming later, I can see Boeing padding their offer to Delta with interim leases of A321 from around the lessor community ?
Which brings us to this : CFMI appears behind the scene as wheighing in if not the arbiters-in-fact to this Delta business deal … and CFMI – backed by GECAS – can pull more than one rabbit out of their hat !!
I think you have hit the nail on the head. The level of demand for which there are effectively only two families competing for means that being slightly inferior (sorry FLX) is not an issue for now. When will this potentially change? It certainly looks like it will be a very slow process.
If we take both AB and BA single isles at 600 pa they have minimal competition from BBD at 100 eventually (in a different segment) and based on the glacial ramps achieved in the past by Comac and the Russian aircraft industry the status quo will be around for 10 years plus plus.
Of course if the demand evaporates due to a series of massive economic shocks things are different. As I have said in the past AB and BA are far more at risk from an extrinsic event (crisis, war etc etc) than from each other.
I sometimes wonder whether the competition between the two is more rhetoric and less real. You know John picks up the phone to Randy and says ‘you take this one, but I need the next two, okay??’ Of course this is heresy……
And illegal, at least in the US…
Slightly off topic but I noted from Bloomberg this morning that Boeing are to spend $18bn on stock buy back.
Does this explain the NMA delay to 2027?
I also expect the Donald’s next state dinner to carry a sign “sponsored by MacDonalds”
This is the rub, the NMA will cost 18 months of share buybacks, not much for a frame that will generate income for 30+ years. The cost of the B787, although prohibitive, again has gained leadership for many many years and will be increasingly the main cash generator. The MAX will be cash positive relatively soon.
Couple all of this to the cash generated from Defense and Boeing looks a good ‘FCF’ backed and ‘protected’ investment in a time when this sort of investment is difficult to come by.
After being critical of Boeing for many years I am increasingly inclined to see the profitability/ cash generation abilities as fundamentally strong. Certainly they are stronger than Airbus.
Share buy backs have a place where excess cash is generated that cannot be profitably reinvested in the business. For Boeing this is reinvestment in the commercial side as govt business effectively provide the development cash and infrastructure capital. If Boeing were to go and invest in NMA + NSA + true B777 replacement in the near future they would simply force Airbus into responding.
Gaming the alternative outcomes Boeing have gone for a reasonable compromise at a relatively low risk that is palatable to investors. Put in the same position as senior management I think most of us would come to similar conclusions.
Sorry slight off message
The 787 not great from a project accounting point but is staring to become a cash generator and have major impacts on AB’s wide body sales which give AB less armor in their war chest to develop something new between 200 and 300 seats.
The BA NSA obviously a big question, could we see a major 737 upgrade before the NSA (“MAX+”) with new undercarriage, etc that could accommodate larger fanned (75″-80″) GTF’s.
Not a 757 but somewhere between it and the MAX10. This would allow Boeing to optimize the 797 more towards ~250 seats.
Split order.321,delta really likes it,dosnt let Boeing off hook,domestic politics
While Boeing has been talking about MoM / NMA for more then 4 years, Leahy might be sharing plans for a much lower risk, faster and cheaper 757/767 solution to Delta. And puts in flexibe buffer of more US build A321s with buy back guarantees for the transition period. Delta to decide between GE LEAP or UTC PW1100.
For your information: FTV8 CSeries is in Atlanta now…
Thanks, an order for 100 x CS300’s and options on 100 x A321NEO’s could some Boeing guys wanne get to Mars soon.
Of course Delta is still talking to Boeing. Drives down the cost of the Airbus planes.
What delivery slots after the indigo order does airbus actually have to offer over the next five years?
All the drama queens in this discussion are amusing but delta really needs these aircraft, and not around 2025-2030. Dreaming up creative Bombardier options seems crazy for a program that can’t deliver over 20 aircraft a year and can’t get around the subsidy issue.
Boeing is ramping up production faster and has a smaller backlog. They can price services (for in service and new orders) and planes competitively. It’s not a tough deal to figure out who is in the lead here, really. Runway performance isn’t an issue at any Delta narrowbody airports of significance.
Airbus isn’t McDonnell Douglas/Lockheed circa 1981 and isn’t going to rush a new variant to market for delta airlines hundred frame order.
Maybe its a combination of CS300’s and 321’s (CEO/NEO?).
@Texl1649: Don’t forget the A320 FAL in Mobile; now at 4/mo, going to 6/mo and then to 8/mo.
If DAL goes for A32X”es (and/or CS300?) could a “peace offering” to Boeing be the commitment to a significant (50+?) number of new 767-300’s if that program goes ahead?
Off topic but some reading on the US and ME big 3’s.
Sorry, link below.
And something from the local media on Tom Enders, could we see someone from North America replacing him?
And in the mean time Boeing share price at a peak, $18 billion share payback and fat dividend. Maybe aggressive take-over of AB after Leahy and Enders?
BA market-cap $174B, AB $67B, 2018 should be interesting.
Some interesting insights into the hotly contested single-aisle market, tainted by the author’s gratuitous and unprofessionally-partisan jab at a legitimately elected American President. While writer Scott Hamilton’s professional career, also tainted, takes a serious credibility hit, the real damage is that he thought so little of the unquestionable patriotism of a president who actually wants to help build the American economy and support the jobs of aircraft designers, builders, pilots, employees and everyone else who works in aerospace. That brings us to another question: Who appointed Hamilton the industry’s political conscience? The answer is, nobody who works in this vital national industry. Hamilton, please contain your political leanings and report only on the things you are knowledgeable about: aviation.
Are you an assistant press secretary to the White House? Keep up the good work