Leeham Co. analyst Scott Hamilton broke the news last night that Delta Airlines has decided to go with Airbus' offer of the A350-900 and A330-900 aircraft essentially rejecting Boeing's offer of the 787. The rumor, right now, is that Airbus offered favorable delivery slots in 2017 while Boeing's delivery book for that year is completely sold out.
Interestingly Delta had inherited Northwest Airlines' 787 order when they merged in 2009. At that point the Delta had the early delivery slots for the 787s yet over time they had elected to move those delivery slots further out to the right to around 2020 and beyond. If they had kept those delivery slots for the 2017-2018 time frame, Delta could have had the 787-9 and at a very competitive price as well. One has to question Delta's fleet management decisions in context of the Airbus order while still holding a 787 order with early delivery slots.
Now that they have gone with Airbus the 787 order is in limbo and, in my opinion, order that will never be delivered even though it will remain on the Boeing order book just like Virgin Atlantic's A380 order with Airbus.
Thursday, November 20, 2014
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9 comments:
It has been obvious for a long time that the 787's huge order backlog was going to cost them sales. One wonders whether Boeing will now consider ramping up production sooner to a higher rate.
Since the 787 can replace 777-200's, A330's, and 767's as well as fleet expansion, they could support a production rate of 20 per month. It's sad to see them giving away business.
Nick, the problem is that they still aren't profitable on the current production rate.
Delta has the 3rd or 4th largest fleet in the world - this is not just a huge loss for this order, it essentially loses the Delta account for good. Wow, this wasn't just a one-off miss, it's the JAL decision for Airbus earlier this year is similar - a huge defection from a long-term, "safe" customer.
It appears something is wrong at Boeing and I venture it starts at the top. Boeing needs a plane guy at the top, certainly not McNerny, an ex board member who has proven to be a real stiff. I hear Mulally is available!
Well, losing the sales isn't fun, but there isn't much Boeing can do if their production/supply cannot meet the demand.
77W is a bit pricey, a bit older and may be too big for Delta vs 359.
789 is a bit late (delivery slots availability) and pricier than 339neo.
Plus, A must have offered a great deal to Delta at the expense of European tax payers. These socialist scumbags!
John E - Usually higher production rates help drive down cost per unit. Losing the Delta sale will cost them at least $20 billion in revenue for this order plus additional billions for the inevitable add-on orders that will now go to Airbus.
It is my observation (no in-depth analysis) that large orders always bounce around Boeing and Airbus because of the availablity of delivery slots. When the 787 was the only new plane, Boeing got all the orders. When the A350 was offered, new orders went to Airbus because airlines could get the A350 sooner. The same has happened with the 737 and A320 over and over.
I don't think there is anything Airbus or Boeing can do about that. Yes, they could ramp up production, but that would yield short-term gains at huge long-term losses. I think this is how business it's going to have to be.
I think Delta either wanted the A350 over the 787, or they really screwed up by giving away Northwest's slots.
I can understand delivery slots, but not only did Delta have early slots, they had plenty of time to get in the queue if that was the issue. To wait and then demand preferential treatment at the last minute is not the way to work things.
By the way, the projected numbers on the 789 are quite interesting. If the ACAPS is to be believed, not only does the 789 carry 40 more passengers (16% more), 300 or 500 more miles, it does it with only 300 lb more fuel (223378 lb for 788 vs 223646 lb for 789). 16% more passengers + >6% more range for 0.1% more fuel seems to indicate more than 20% better seat miles per gallon for the 789 vs the 788. Can it really be that much better?
Congress has yet to decide whether it has to renew the operation of Ex-Im Bank by July. Delta is determined to see its termination because of its lopsided loan provisions handed out to foreign carriers, which are hurting Delta’s growth and snatching away some of its market share on key international market . However, Boeing is fighting to keep it, since it connotes that there would be no credit line available for airliners to finance their purchase of aircrafts, even during good times, when credit is widely available from other sources.
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