Monday, May 2, 2016

Will Delta Turn The Corner For Connor?

Recently Delta has chosen the Bombardier C Series (100 seats) over the Boeing 737-700 offering (125 seats). Then Delta made an order with Airbus for its A3210NEO (185 Seats) over the Boeing 737-900. Boeing can't win with Delta during this episodic ordering binge. Ray Connor’s relationship with Delta's CEO Ed Bastion, seems to be very solid.

King 5 News:

"Delta’s new CEO Ed Bastian shared a bit of insight in a briefing. Bastian says he's good friends with Boeing Commercial Airplanes CEO Ray Conner, and the carrier told us they would like to have a larger 737. Boeing is already investigating that, a possible replacement for the no longer produced 757, which Delta also flies in large numbers. Sometimes referred to as the "middle of the market" airplane."

If Boeing would approach a “middle of the market” aircraft it would cause an enormous ripple effect in the industry. But would they do it for just one such as Delta airline?  

The answer is that Boeing is between a rock and hard spot, as it marshals its financial resources with the following:

·      737 Max Family
·      777X
·      767 Military program

Past postings were made about the middle of the market MOM. With Delta Friendship aside, Boeing is only just "looking" at this market wedge between single aisle and duo aisle aircraft. Boeing has a "MOM plan in hand", and Delta has rebuffed Boeing while its in its hard spot. Boeing has to solve these points on the road to MOM.

·      Plant Capacity
·      Financial Resources
·      R&D resources
·      1000 airplane soft commitment book

They can or will have a plant capacity plan when Boeing announces the MOM. The financial resources will become available after the Max cash flows begins and the 777-9X's entry into service arrives. The R&D resources also becomes available when both the above mentioned airplanes progress matures from the design stage.

Finally, it is probable that Delta has made its case with Boeing referring to a unique type found in the middle of the Market for which Airbus does not have an answer. Delta may have an exclusive position as a launch customer for the MOM in numbers of 150 of this type. If this assumption is sound, then Boeing has another 850 commitments to go before it says it's so.

Everything points to 2020 in Three and a half years. There are 757 aficionados who love their aging aircraft and a 2020 announcement date fits smartly into place for achieving the four above mentioned obstacles Boeing is facing while sitting on its "Rock".

They could pull in another 500 units committed from its varied customers currently flying the 757. It also could pull in a commitment from a customers like Ryan Air or Norwegian Air. Having a complementary model to its existing fleet and current order books synergizes those fleets. It is feasible that Boeing has a commitment book in secret and already exists a solidification for a 1000 unit announcement. 

A MOM would be a hybrid type from coming from the Max and connecting the 787 commonality for a 4-5 thousand range aircraft. The Atlantic Ocean market would be perfect for a MOM. The Pacific basin is too vast for a MOM trans-crossing it, but it could easily become a regional flyer in that basin making an optimal fit. 

The MOM is four years off or not at all. Boeing will have its bullet point ducks in-a-row by the year 2020, and by making Boeing whole it will make Delta happy.