Delta Air Lines' decision to sign up with Boeing for 20 years prompted analysts to coo their approvals. But one former Capitol Hill veteran worries that this deal will only stoke the antitrust debate over the proposed Boeing- McDonnell Douglas merger.
Mike Korens, managing director at consultants GKMG in Washington, and former majority counsel to the Senate Aviation Subcommittee, says the $6.7 billion deal is great news for Boeing, but the timing may be unfortunate. 'It certainly adds fuel to the [European] Commission's competitive concerns,' says Korens. 'From a policy point of view, it adds weight to the argument of those who are opposed to the merger.'
Korens also believes that the Delta deal cannot be ignored by Airbus. 'Airbus is in a difficult position if you look at both the American Airlines and the Delta contracts. It is one thing to lose a contract for a fixed number of planes . . . but when you lose up front in a long-term, exclusive contract, that is different. I don't know that Airbus will have much option other than to take it up - the stakes are too high.'
Airbus, meanwhile, denies it is studying the antitrust implications of the Delta deal. 'We did not say at any time what we were going to do, if anything. If the European Commission or any other government agency wants to talk to us about these issues, we would be prepared to cooperate.'
But prior to the Delta deal one Airbus official admitted that the apparent calm approach to the proposed Boeing-MDC merger is a front, adding that behind the scenes 'we are running out like headless chickens.'
Delta and Boeing also performed some kid-glove handling of the deal when it was announced in late March. The carrier's chairman, president and chief executive, Ron Allen, in paying tribute to Airbus' bid, added somewhat bizarrely that 'there were no losers, but there were winners.' Ron Woodard, president of Boeing Commercial Airplane, played down the idea that this was the start of a trend. 'To do a deal like this you need an airline that is . . . strong financially so the manufacturer can make the commitment.'
Delta's acquisition plan includes 106 firm orders and 124 options through to 2006 as well as 414 rolling options to 2018. B737s, 757s, 767-300/ERs and 777s are included in the contract, as well as the stretched B767-400, for which Delta is the launch customer.
A high degree of flexibility is incorporated in the agreement, allowing Delta to switch among models at short notice or defer deliveries without penalties. Vivian Lee, analyst at BT Securities in New York, particularly welcomes this aspect of the deal. 'This flexibility will enable Delta to better match lift with demand, which is good news for the company and good news for the industry as a whole.'
Source: Airline Business
