Tag Archives: N925AT

Delta explains its aircraft fleet strategy, follows-up on CEO Anderson’s “aircraft bubble” comment

Delta Air Lines (Atlanta) has issued this statement explaining its fleet strategy is driven by opportunity and flexibility:

Delta logo

Delta does things differently than most airlines, and that includes the way it buys airplanes.

While most big carriers replenish and expand their fleets with brand new jets, which are either leased or purchased, Delta has purchased a mix of new and used aircraft over the past several years.

Ed Lohr, Delta’s Managing Director of Fleet Strategy, explained that the airline looks at the entire cost of jet – the purchase price, the maintenance costs, fuel efficiency and other factors – before making decisions. Often, used aircraft make the most economic sense for the airline.

And thanks to Delta’s TechOps aviation maintenance team, used planes can be maintained and retrofitted with entirely new interiors, providing a superior customer experience even though the jet may be a few years old.

And Delta typically purchases planes outright rather than leasing them.

“We do have a different strategy than most of our competitors,” Lohr said. “When you have a strong balance sheet like we do, a great TechOps organization like we do, it gives you a lot more flexibility to take advantage of opportunities when they come up.”

Above Copyright Photo: Brian McDonough/AirlinersGallery.com. Ex-AirTran Airways Boeing 717-231 N925AT (msn 55079) arrives at Baltimore/Washington (BWI). N925AT was formerly painted in the special “The Wizarding World of Harry Potter” (Universal) livery.

For example, Delta acquired 88 used Boeing 717 (above) after Southwest inherited them in its merger with AirTran Airways. Those jets fill a critical role in Delta’s domestic network, and were given nose-to-tail revamps before entering service.

Delta has similarly scoured the world for used MD-90 jets, reliable narrowbodies that are also dramatically upgraded and brought into the fleet at a very reasonable price.

Still, Delta will buy new when it makes sense. For example, the airline recently ordered 25 fuel-efficient Airbus A350-900s to fly primarily long-haul trans-Pacific routes starting in 2017.

The aircraft strategy is one of the reasons Delta has been able to pay off more than $10 billion in debt since 2008, and has seen its credit rating rise to just one notch below investment grade. Less money is tied up in expensive new jets, and instead can be invested in airport facilities, operational performance, new technology and on-board improvements to enhance the customer experience.

“The days of buying just one brand of aircraft, or signing huge orders all at once, those are definitely over,” Lohr said. “At least, they are for us.”

Trebor Banstetter

Graph:

Delta Mainline Fleet Graph (Delta)(LRW)

Delta logo

In a related story, Delta also issued this further clarification after CEO Richard Anderson’s recent comment about an “aircraft bubble” (also reported by us):

The aviation world was buzzing last week after Delta CEO Richard Anderson discussed an “aircraft bubble” that has been dramatically pushing down prices of used widebody aircraft.

“We’re seeing a huge bubble in excess wide-body airplanes around the world,” Anderson said during Delta’s third quarter earnings conference call. Anderson said he had seen mid-life Boeing 777-200 aircraft being available in the market at about $10 million.

Delta’s aircraft experts, Greg May, Senior Vice President – Supply Chain Management, and Ed Lohr, Managing Director – Fleet Strategy, told Delta News Hub that several trends have conspired over the last few years to create a “perfect storm” driving down prices.

The major factors:

A large number of leased widebody aircraft are being returned to lessors and manufacturers, causing a glut in the market.

Boeing 777While Delta generally purchases both new and used aircraft, many carriers lease new planes, turning them in when the lease ends, usually after seven to 10 years. Those aircraft often end up on the used airplane market.

One factor driving the large number of leased aircraft now being sold is the nearly four-year delay in deliveries of Boeing’s 787 jet, Lohr said. The delay caused many airlines to lease Airbus A330 and Boeing 777 aircraft (left) to bridge the gap while waiting for their orders to be fulfilled. Many of those aircraft are now nearing the end of their leases and being returned.

One aircraft in particular – the Boeing 777-200ER powered by Rolls-Royce Trent engines –will be entering the used market in significant numbers over the next couple years, May said. He also cited the new Airbus A350 (below), a twin-engine long-haul competitor to the Boeing 787, which has reduced demand for the 777.

“There was a time when the 777 had that market all to itself,” May said. “With the A350 and the 787 that’s no longer the case, so it’s not as attractive.”

Softness in the international economy has slowed capacity growth and reduced demand for wide-body aircraft, pushing down prices.

Economic softness in Asia and Latin America has caused many foreign airlines to tamp down growth plans. That has resulted in leased widebody aircraft being returned earlier than expected.

“They are paying the rent on those planes every month, so it’s very expensive to park them,” Lohr said. “That’s why they are not extending leases and in some cases are willing to pay a penalty to get out of other lease early, in each case, increasing the availability of used aircraft in the market.”

In addition, lower fuel prices have blunted a major advantage of new planes, which tend to be more fuel efficient.

Cheap financing created a demand for new aircraft, lowering the value of used jets.

Historically airlines in small and developing nations primarily leased or purchased used aircraft because they couldn’t afford new jets. But a wave of cheap financing, some from export credit agencies, has made it much easier for those airlines to buy new planes. Less demand for used aircraft means lower prices.

Airbus A350Lohr likened the widebody jet bubble to the housing bubble in the U.S. that burst in 2008 and collapsed the real estate market.

“Why did we have a real estate bubble? Because anyone and his brother could get a loan,” he said. “It’s the same story with new airplanes.”

While these factors have primarily impacted the widebody market, the narrowbody market is likely to be affected as well, Lohr said.

“The economics and the trends will eventually get to the narrowbodies,” he said.

After Anderson’s comments, Boeing’s stock value plunged. Analysts issued a flurry of reports debating the issue, and the question will likely be in the spotlight this week when Boeing announces its third quarter earnings.

Reuters reported Friday that Boeing may need to slow production of its Boeing 777 because of the weakness in the used aircraft market. Orders for the current generation 777 have fallen from 194 in 2011 to 63 in 2014 and just 34 this year, according to the report.

“Boeing is going to have to slow down the production rate,” Gueric Dechavanne of appraisal firm Collateral Verifications told Reuters.

Despite the attention that Anderson’s remarks received, Delta isn’t in negotiations to purchase used planes for the airline to fly right now, May said.

During the earnings call, Anderson said that he expects prices to decline further.

“Prices are going to get lower,” he said. “You wouldn’t strike a deal now.”

Delta Air Lines aircraft slide show (current livery): AG Airline Slide Show

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Southwest Airlines to expand its code-share with subsidiary AirTran Airways

Southwest Airlines (Dallas) has announced that it is taking the next step in its marriage with subsidiary, AirTran Airways. Customers are now able to purchase a growing number of itineraries between the Southwest and AirTran networks for travel on a single itinerary. Soon, Customers will be able to book flights to any of the airlines’ combined 97 destinations, including international, in one transaction.

“Connecting the networks is a priority in 2013 and a major milestone as we work to combine our two Companies,” said Bob Jordan, Chief Commercial Officer at Southwest Airlines and President of AirTran.  “With a connected network, we can offer Customers more itineraries, more destinations, more low fares, and a taste of what’s to come once the integration is complete.”

Southwest Airlines and AirTran Airways took the first step in connecting their networks on January 26, 2013, by offering a small number of shared itineraries in five markets.  The initial phase was successful, and the airlines are prepared to launch in 39 cities on February 25, 2013.  The airline is on pace to fully connect the networks in April.

By connecting the Southwest and AirTran networks, Customers may:

  • Add one or more AirTran domestic flight segments to a Southwest itinerary, using Southwest booking channels (southwest.com, 1-800-IFLYSWA, travel agencies, Southwest’s mobile site and apps, and Southwest Airlines ticket counters).
  • Book one or more Southwest flight segments connecting to an AirTran itinerary, using AirTran channels (airtran.com, 1-800-AIRTRAN, AirTran Airways ticket counters, and travel agencies).
  • Use all Southwest channels to book an AirTran-only domestic itinerary.
  • Add an international AirTran segment to a Southwest itinerary within a single reservation, through a Customer-friendly transfer of the transaction to AirTran channels for booking, purchase, and ticketing by AirTran.
  • Earn currency in either loyalty program no matter which carrier they fly. (The currency a Customer earns is determined by the carrier from which they buy their ticket, even if flying on a shared itinerary.)

As is standard with industry “code share” arrangements, the Marketing Carrier’s rules and policies apply to reservations and ticketing.  The Operating Carrier’s procedures apply to boarding, seating, and the onboard experience. Southwest is making one exception: any itinerary with a Southwest segment or that is purchased through a Southwest point-of-sale channel will not have bag fees for the first or second checked bag (weight and size restrictions apply).

Southwest Airlines announced plans to acquire AirTran Airways on September 27, 2010, an acquisition that significantly expanded Southwest Airlines’ low-fare service to more Customers in more domestic markets, creating hundreds of additional low-fare itineraries for the traveling public.  Since Southwest Airlines closed the deal to purchase AirTran Airways on May 2, 2011, Southwest and AirTran Employees have worked hard to guarantee a thoughtful and smooth integration process while providing the same high level of Customer Service that Customers have come to expect. To date, Southwest Airlines has welcomed 29 percent of AirTran Employees to the Southwest Family, has converted 11 AirTran Airways 737-700 aircraft to the Southwest paint scheme and interior configuration, and has transitioned five AirTran Airways-served cities into Southwest Airlines operations.

The process of a full integration of the AirTran Airways 737 fleet into the Southwest Airlines fleet (i.e. paint scheme and interior configuration) and transition to a single ticketing system is a large and complex process that is expected to be completed by the end of 2014.  Southwest Airlines realized $142 million of net, annualized, pre-tax synergies during 2012, and expects to achieve $400 million in 2013 (excluding acquisition and integration expenses).

Copyright Photo: Tony Storck. All visuals for AirTran Airways, including aircraft, will be gone by the end of 2014. The Boeing 717 fleet will be leaving sooner for Delta Air Lines. Southwest will not operate or integrate the Boeing 717s. Therefore many of the special color schemes on the 717s will be retired when the aircraft are removed from the AirTran fleet. The pictured ex-TWA 717-231 N925AT (msn 55079, ex N412TW) displays the special “The Wizarding World of Harry Potter” color scheme at Baltimore/Washington.

Southwest Airlines: AG Slide Show

AirTran Airways: AG Slide Show

AirTran Airways adds new flights to Fort Myers

AirTran Airways (Orlando) today announced several new flights to Ft. Myers. The airline also announced additional service to Las Vegas.

AirTran Airways will offer flights to Ft. Myers from Bloomington/Normal, IL (starting on March 9, 2011), Buffalo/Niagara Falls, NY (starting on March 8, 2011), Moline/Quad Cities, IL (starting on March 8, 2011), and Rochester, NY 9starting on November 20, 2010).

In addition to the new Ft. Myers flights, AirTran Airways is also adding service from Indianapolis to Las Vegas, five times a week, starting on March 10, 2011.

Copyright Photo: Brian McDonough. Boeing 717-231 N925AT (msn 55079) in the special “The Wizarding World of Harry Potter” promotional scheme prepares to land at Baltimore/Washington.

AirTran Airways unveils its “Wizarding World of Harry Potter” logojet

Copyright Photo: AirTran Airways. Boeing 717-231 N925AT (msn 55079) is pictured after painting.

AirTran Airways (Orlando) yesterday (June 16) unveiled an addition to their partnership, a one-of-a-kind “Wizarding World of Harry Potter” themedaircraft.

This distinctive aircraft is the latest expansion of a partnership that includes exclusive travel packages and special offers to people traveling on AirTran Airways to the Universal Orlando Resort.

Boeing 717-231 N925AT (msn 55079) features an illustration on the aircraft depicting a wizarding hand, complete with wand, stretching from the back of the plane to the front. The tip of the wand is pointing towards The Wizarding World of Harry Potter logo across the side of the fuselage. The wand and hand sit just above the Universal Orlando Resort emblem.

N925AT went into service on June 16 between San Antonio and Orlando. This Harry Potter logojet follows the Virgin Atlantic Airways version.

Photo: AirTran Airways.