Monday, May 8, 2017

A Delta Delay of its 10 A350-900 Changes Everything.

Delta airlines is pondering delaying 10-A350's as it restructures its fleet requirements. Too much too soon may sink Delta values. However, a Boeing opportunity may emerge as Delta's management continues its normal turnover at upper levels. New thinking is evident by the A350 delay consideration. Delta is working on a buying pause with its fleet renewal or expansion plans. An Airbus order delay would signal Delta's caution because of the fluid and dynamic nature of changing markets and strategy for assigning inventory for both opportunity and efficiency when using its existing inventory.

Boeing lost a bitter sales campaign to Airbus when it signed on for twenty-five A-350-900's several years back. It would love to have that loss back with another try. This is were a speculative sales offer would come into view. How could Boeing take advantage of Delta's changing management? It would depend on who comes into Delta and who retires. Boeing could not get a second chance at all but the recent discussion are centered on an A350 delivery delay for ten of its type.

One consideration by Delta would be pricing for new equipment with open delivery dates. That would satisfy a Delta goal of having a flexible fleet change when expansion and renewal dynamics are in play. It is possible the Delta/Airbus A350 contract is not flexible enough taking on its large of order during the next 10 years. A delivery pause would allow a counter from Boeing to offer just in time 787's leading-in with the 787-10 model.

The 787-10 doesn't fly as far as the A350-900. It may only need to go 6,000 miles in Delta's network. The A350-900 maybe an overcapacity type aircraft that can go 8,000 miles but having only those few routes for the distance capability available, Delta wouldn't fill-up 25 aircraft with paying passengers. If the A350-900 holds 325 passengers it would not fly 8,000 miles nor could Delta fill those seats up for its long thin route capability. Perhaps the 787-10 is more efficient than the A350-900 going just 6,000 miles where 90% of the market resides. A Boeing sales pitch suggest this point.

Delaying the A350-900 would signal a rethink of Delta's strategy and Boeing could re-pitch its 787-10 which wasn't complete at the time of the last go round. It was all about the 787-9 at that time and Airbus made its A350-900 more attractive where Delta finds itself working to find routes for long range heavy haulers. There is no A350-800 on the boards and its A350-1000 does not match Boeing's 777-9X capabilities. Delta knows this and it must find a home for its Airbus order. When the deal was struct back in November 2014 Delta just signed with Airbus. The 777X was a paper airplane and the 787-10 was just in a Boeing Dream mode. Now it flies every day in test mode.

Delta could opt for a Boeing deal four years out for delivery and fit Delta's plans better than taking on 25-A350's starting now and dropping the Airbus purchase for 25 A330's  later. A Delta delay on the A-350 may suggest its Airbus purchase for another 25-A330's may be dropped. Boeing could offer 10 and 10 of its 787-10 and 7779X delivered during the year 2020 and beyond using a flexible delivery schedule at Delta's own need. Also the 787-8 or 787-9 may also be a better fit than the A-330 for its operations. 

Either way, Boeing has a slim shot at making a deal with Delta as it considers buying either the NEO or Max single aisle. In that deal making process, Delta may experience a sea change for its planning of its fleet.