ANALYSIS: Delta’s potentially refreshing Airbus order

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Delta Air Lines' order for 40 Airbus aircraft gives it the flexibility to either replace aircraft or increase frequencies, as it continues with its larger fleet refresh programme.

The order is split between 30 A321s with deliveries in 2016 and 2017, and 10 A330-300s with deliveries from 2015 to 2017. The deal is valued at about $5.6 billion at list prices.

The deal is Delta's first with the European airframer since it ordered nine Airbus A310s for its transatlantic operations in March 1992. The aircraft were delivered in 1993 but removed from the airline's fleet by the end of 1995, Flightglobal's Ascend Online database shows.

"This Airbus agreement is another opportunistic fleet transaction for Delta in which we acquire economically efficient, proven-technology aircraft," said Richard Anderson, chief executive of Atlanta-based Delta, in a statement on the deal. "These A330s and A321s will provide tremendous flexibility for Delta to optimally manage our capacity over the next five years while further improving the flight experience for our customers and returns for our shareholders."

Flexibility seems the name of the game. The SkyTeam Alliance carrier declines to comment further on the order but Anderson's statement and previous comments give the impression that prudent capacity management will remain the name of the game.

Anderson said in July that a slight increase in capacity this year - it has not provided specific guidance but expects 1% to 3% increase in available seat miles (ASMs) during the third quarter - will come from upgauging to 76-seat and 110-seat aircraft from 50-seat regional jets while shrinking its overall fleet count by 16 frames.

The changes are the beginning of a larger programme to remove nearly 200 50-seat regional jets and replacing them with 88 Boeing 717-200s and 70 76-seat Bombardier CRJ900s by the end of 2015.

"It's just our gauge is going to be up a bit," said Anderson. "But that shouldn't be mistaken for any change in philosophy about how we manage capacity."

757 REFRESH

"The A321 looks like a 757 replacement," says Shakeel Adam, managing partner of aviation consultancy Aviado Partners. "The A321 will operate on certain markets where there's high volume and between key cities, but not where it's going to have to stretch its legs."

Such a move would be in line with other 757 replacement orders. Delta has 100 180-seat Boeing 737-900ERs on order to replace "older technology Boeing 757 and 767 and Airbus A320 aircraft", as it said in 2011, and American Airlines has ordered the A321 to replace its remaining 767-200ERs and domestic 757-200s.

The A321s would fit well on Delta's short- and medium-haul 757 routes. These include flights between its Atlanta hub and cities like Indianapolis, Jacksonville and Richmond. Such a service plan would also avoid some of the aircraft's range limitations when carrying a full payload.

Delta's A321s will come equipped with sharklets, which will reduce fuel burn by about 4% and add either 100nm in additional range or about 450kg of additional payload, according to Airbus. Most of the aircraft will be assembled at the airframer's under construction assembly line in Mobile, Alabama.

The carrier's 142 aircraft 757-200 fleet has an average age of 20 years with aircraft delivered from 1984 to 2002, according to Ascend. The aircraft are configured with 171 to 184 seats.

Delta has 57 A319s and 69 A320s in its fleet, Ascend shows.

A330 FLEXIBILITY

The 10 A330s provide Delta with more growth opportunities than replacement options. Configured with 293 seats - its existing flat-bed configuration for the type - the aircraft fits well with its existing service patterns over both the Atlantic and Pacific.

The carrier says that the enhanced 242t variant will give it the "versatility to optimise its Pacific and Atlantic networks". The higher-weight variant allows for an additional 500nm of range and 5t of payload compared to the existing 235t A330-300.

Aviado's Adam says the enhanced variant strengthens the operational capabilities of the aircraft by allowing it to operate without weight restrictions on routes to the edge of the existing A330s capabilities and to routes that Delta can only fly with its larger Boeing 747-400 or 777-200 aircraft.

"They're covering their needs with good size, efficient aircraft," he says, adding that Delta could use them to boost hub-to-hub frequencies from either the US west coast to Asia or the US east coast to Europe.

The carrier flew more than half of its Atlantic capacity to its alliance partners hubs - a first for the carrier - from June. Similarly, its Tokyo Narita hub handles more than 50% of its Pacific capacity with the percentage jumping to nearly 70% when its SkyTeam partner hubs are included, Innovata FlightMaps Analytics shows.

Delta has 11 A330-200s and 21 A330-300s in its fleet, according to Ascend.

The Airbus widebodies are not a direct replacement for the oldest widebody types in Delta's fleet. These include its 376-seat 747s with an average age of 20 years and its 208- to 261-seat Boeing 767-300ERs with an average age of 19 years, Ascend shows.

The airline could use the aircraft to either upgauge or downgauge its widebody fleet, however.

The order could also be a sign of the limited availability of the Boeing 787, a next generation competitor of the A330. Adam says that Delta may take a slight hit on performance with the A330 compared to the Dreamliner but that it will benefit from lower capital costs and possibly earlier deliveries.

Delta has 18 787-8s on order but deliveries do not begin until 2020. It inherited the order from Northwest Airlines when the carriers merged in 2008.