Airbus’ expansion into Boeing’s home market faces a potential setback as Delta Air Lines reviews a US$14 billion purchase of the European plane maker’s two-newest wide-body models.
The Atlanta-based carrier is studying its twin-aisle orders amid signs the long-range travel market is saturated, said Ed Bastian, Delta’s chief executive. While he did not name Airbus, Delta has no twin-aisle orders pending with Boeing, according to the US company’s online database.
Word of the review intensified concerns that demand for long-haul planes is weakening as a long jet-buying binge draws to close. American Airlines last year deferred its order for Airbus A350 jets, while United Airlines said it may swap its purchase for smaller planes.
“It definitely contributes to what’s been a building caution, or wall of worry around the wide-body market,” said Ken Herbert, an aerospace analyst at Canaccord Genuity.
Airbus out-fought Boeing for Delta’s 50-jet order in 2014 and is slated to begin delivering the first of 25 Airbus A350s later this year. They are intended to replace the Boeing 747 jumbo jets that once shuttled Delta’s passengers to Asia. The airline had also ordered 25 of Airbus’s A330neo, which has yet to fly, as a replacement for its oldest Boeing 767 planes.
“We continue to see excess capacity in wide-bodies as we look to the future for the industry as a whole,” Bastian said. “We continue to look internally as to what that means for Delta,” he said, adding that the airline is in discussions with plane makers.
“You could anticipate some reductions, I think, broadly over the next several years,” he said.
Mary Anne Greczyn, a spokeswoman for Airbus, said: “It’s not appropriate for us to comment on our customers’ internal analyses. However, as a leading aircraft manufacturer, Airbus continually engages our customers around the world to help optimise their fleet needs.”
The prospect of Delta postponing or cancelling the wide-body order adds to the uncertainty over Airbus’ efforts to make inroads in the United States with its next-generation models. Such moves “would not be welcome by Airbus, especially from one of the Big Three US airlines where its wide-body market penetration is not particularly strong”, said the aviation consultant Scott Hamilton.
Delta’s latest review does not necessarily mean Airbus will lose business, Mr Hamilton said. The airline could defer orders to a schedule that better fits its demand forecast. It could also shift the mix to other models such as a lighter-weight regional A330 or narrow-body A321neo, he said.
The carrier is thought to be considering issuing a request for proposals for single-aisle aircraft that would pit Boeing’s 737 Max against Airbus’s A320neo family, Mr Hamilton said. Delta will also need a mid-market aircraft, such as the regional A330 or the so-called 797 under consideration at Boeing.
“At face value, the Delta statement might seem alarming,” he said by email. “But as so often becomes the case, the ‘review’ may not be what it seems.”
In December, Delta scrapped a longstanding order for 18 Boeing 787 Dreamliners that it inherited in its 2008 merger with Northwest Airlines. At the time, the airline said the decision was consistent with the need “to prudently address our wide-body aircraft needs”.
* Bloomberg
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