Last Wednesday, Delta Air Lines, Inc. (NYSE:DAL) announced that it had placed an order for 40 new Airbus aircraft: 10 A330 widebody aircraft, and 30 A321 narrowbody aircraft. These new planes will be used to replace older, less-efficient aircraft that are ripe for retirement.
Today, Delta Air Lines, Inc. (NYSE:DAL) operates a mixed fleet of The Boeing Company (NYSE:BA) and Airbus aircraft, along with older McDonnell Douglas aircraft, but the balance is skewed heavily in favor of The Boeing Company (NYSE:BA). But whereas some airlines have opted to simplify their fleets around a few aircraft types, Delta Air Lines, Inc. (NYSE:DAL)’s new order signals that it prefers to maintain a competitive balance between The Boeing Company (NYSE:BA) and Airbus. As a result, Boeing will have to settle for splitting Delta Air Lines, Inc. (NYSE:DAL)’s future orders with Airbus.
A mixed strategy
This recent order was Delta Air Lines, Inc. (NYSE:DAL)’s first mainline aircraft order since 2011, when the carrier ordered 100 Boeing 737-900ER aircraft. These Boeing aircraft — which will begin arriving in the next month or so — are similar in size to the A321s that make up the majority of Delta Air Lines, Inc. (NYSE:DAL)’s new order.
The 737-900ER is the largest aircraft in Boeing’s 737 family, and will seat 180 passengers in Delta’s configuration. Delta also operates the smaller 737-700 and 737-800 variants. Operating multiple aircraft variants from the same family allows an airline to economize on maintenance and training costs because the airplanes share a common design.
These benefits have driven some airlines to standardize on one or a few aircraft types. For example, Southwest Airlines Co. (NYSE:LUV) has historically only operated aircraft from the Boeing 737 family. When Southwest Airlines Co. (NYSE:LUV) acquired Boeing 717s through its purchase of AirTran Airways, it promptly turned around and signed a sublease agreement with Delta to get back to a single fleet type.
Delta’s outstanding orders with Boeing — it also has 18 orders for Boeing’s new 787 Dreamliner that will be delivered after 2020– gave Boeing a potential advantage in winning future orders from Delta. After all, ordering more aircraft from the same “type” would have allowed Delta to save on maintenance and training costs. Yet Delta instead opted to diversify by ordering similarly sized planes from Airbus. Why did Delta do this?
In the past several years, Delta has consistently shown that it is willing to buck the industry consensus from a strategy perspective.