Friday, December 5, 2014

Delta Order Playback

Delta recently ordered 25 A330 NEO and 25 A350-900's. Here are the three talking points for this order.

  • Time
  • Timing
  • Timeliness
There is a time when Delta is ready to move. That time is now, irrespective of where the Airplane builder has a slot or a position for its accommodation in time. The time is now for Delta to upgrade the fleet. Could Boeing answer the order bell? No they couldn't, as the 787 backlog swamp and the future 787-10 planes are way down the road considering Delta's time piece. Boeing can't meet Delta's corporate time-line.

The second point is timing for Delta. They need to receive these aircraft in a timing sequence, in order to fulfill its fleets expansion in a seamless motion.  It needs a whole new fleet improvement from latest technological aircraft that are efficient without waiting. The timing failure is from a Boeing order book predicament, which would swallow Delta with the cost of waiting on a long order book.  Airbus answered this question sufficiently, it could meet Delta's timing with A330's and the All New A350, where the 787-10 is not going to be ready until 2020. Delta could also reieve an A350-900's sooner than the 787-9. Left out of Delta's conversation is the 777X. This model also falls out of timing until 2020, even if Delta were first in line to receive one. A Delta 777X would be more likely arriving in 2024 than 2018 because of prior customer's build slots. A 787-10 is more likely in 2024 than 2018. That leaves Boeing timing for 2018 on the backs of the 787-9, which does not reach the broad spectrum of Delta expectations for 315 well placed passengers. The 787-9 could compete with what Delta wants, but thy have a backlog problem. The A350 is at 750+ orders and also has a backlog problem for Delta,  but has more flexibility within its order books, as the A350-800 and A350-1000 are not in play yet. They are planning a build-up on the A350-900 production during 2014-2018 where it will begin streaming aircraft towards Delta in 2018 with its A330 NEO followed by the A350-900 later.

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Delta sore card:

  • 787-9 wouldn't be delivered in Delta's window by 2018.
  • A330 Neo is a rebuild and upgrade project it can do, fitting in the Delta 2018 window.
  • 787-10 isn't even built or tested and won't be ready for Delta for six more years as it would wait behind 132 787-10 orders.
  • The A 350 is starting its delivery in days (December 13), and a delivery schedule has holes in it for Delta sliding in at a regular pace from 2018-2020, fitting its growth model. The 25 unit A350 production slots can be fit-in during 2018-2020 time frame at a rate of one a month.  
  • Boeing is booked-up as its own production schedule, when others have dropped or asked for delivery extensions. Even Delta has extended out its own 787's delivery schedule from its prior ordered 787 models and Boeing back filled those openings. Boeing couldn't promise more slots to Delta from other customera. Demonstrating how critical delivery is for Delta during a fleet renewal period it went with Airbus.

This brings us to the final talking point timeliness. Boeing is producing a balance of 787-8 and 787-9 in a simultaneous effort, appeasing its own customer thirst for the 787. The model is exceeding in spite of "787 glitching". Its far more complicated than what Airbus offers, and will continue its maturation for another thirty years. Having said that, Boeing is primed for an airplane sales explosion in 2015 and couldn't help Delta, even if Boeing's eyes were bigger than its stomach. Boeing will say anything to close the deal as would Airbus. But Delta looked at each company's position and decided that Airbus was less encumbered with order status, and therefore the likely hood of timeliness is more predominate with Airbus. This is built on several assumptions. One is that that Airbus will not endure any 787 like faults since it employs standing technology fully vetted for reliability. When Boeing reaches its final vetting process for its systems and battery. The 787 will be a great and greater airplane than what Airbus offers in "Time". Boeing's full 787 and 777X potential will then be reached, setting Airbus back decades in the race. I would expect Boeing will transfer "in-time", the "All Electrical Architecture" to its sibling aircraft, but not until all faults are resolved in the maturation process. Timeliness is a perception issue for Delta, more than an actual problem with Boeing. They see Boeing biting more off than they can chew with quantum leaps in technology and concurrently running projects. Delta views Airbus timeliness more achievable as it had taken the lower road for airplane progress. They have bet on Airbus timeliness with this order, which fits its own corporate goals.

Home work is a good assignment for readers. Below is a link of a fairly minded view on the Delta decision, and is not neccessarily a bad thing for Boeing. I recommend reading this article as it may shead more light on the subject, as it did for me.

Motley Fool Reference Below:

Why Airbus Got a Big Order From Delta Air Lines Inc.