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Saturday, January 15, 2011

Delta May Set Record With 200-Jet Order to Retire Oldest Planes

By Mary Jane Credeur
(Bloomberg) -- Delta Air Lines Inc. plans to order 100 to 200 narrow-body jets and seek options for 200 more, a possible record purchase as it moves to retire some of the oldest planes in the U.S. industry.

Deliveries may begin as soon as 2013 after a request for proposals was sent to “several” planemakers last month, according to a posting yesterday for employees on Atlanta-based Delta’s internal website. Airbus SAS, Boeing Co. and Bombardier Inc. are the biggest commercial-jet makers.

Ordering the full 200 planes would be a record, topping the plan unveiled this week by India’s IndiGo Airlines to buy 180 Airbus A320s with a list value of $15 billion. Delta would shed some of its oldest jets, including DC-9s that average 34 years of age and are among the most elderly aircraft in U.S. fleets.

“None of the other U.S. majors have planes as old as Delta,” said Jeff Straebler, a debt strategist at RBS Securities Inc. in Stamford, Connecticut. “The big costs on older aircraft are maintenance and fuel, and it was time for Delta to look at this.”

Delta, the world’s second-biggest carrier, traditionally bought Boeing jets until adding Airbus jets in its 2008 purchase of Northwest Airlines. The competitors now also may include Bombardier, whose new CSeries is designed to compete with the smallest single-aisle jets from Boeing and Airbus.

Opening for Airbus?

“There’s a better chance for Airbus now that Delta no longer exclusively flies Boeing aircraft,” Straebler said. “Delta’s big enough that they could continue with both Airbus and Boeing families, and maybe even the CSeries.”

Boeing’s 737 and the A320 are twin-engine models seating about 125 to 185 people. Their list prices, on which airlines typically get a discount, range from about $63 million to $95 million, depending on the version. Buying 200 737-800s, the top- selling U.S. jet, would cost $16.2 billion at list prices.

The CSeries seats 100 to 145 people and is intended to replace older models such as the DC-9, which was built by a Boeing predecessor. Montreal-based Bombardier is targeting the end of 2013 for the first deliveries and said last year that the list price would be $52.4 million to $60.9 million.

Delta will consider “large, medium and small” narrow-body jets, Chief Executive Officer Richard Anderson said yesterday in a separate weekly recorded message to employees.

“It’s important we take a very long-term view of our fleet,” Anderson said.

Aging Aircraft

A new jet order will replace planes including DC-9s that average 34 years old, Boeing 757-200s that are 18 years old and A320s that are 16 years old, Nat Pieper, vice president of fleet strategy and transactions, said on Delta’s website posting. The new planes would be used on domestic routes.

Trebor Banstetter, a Delta spokesman, confirmed the posting’s authenticity and said the company declined to comment further on its fleet plans.

“Airbus talks to customers and potential customers worldwide on an ongoing basis,” said Mary Anne Greczyn, a spokeswoman in Washington for the Toulouse, France-based company. “When it comes down to specific conversations about fleet needs and how Airbus can meet those needs, the content of those conversations, and even the existence of those conversations, are confidential.”

Bombardier, Boeing

Bombardier doesn’t “confirm specific discussions with customers,” said John Arnone, a spokesman. “Delta is a longtime and loyal customer of Bombardier regional jets. There are in excess of 500 Bombardier regional jets operated by or for Delta.”

A spokesman for Chicago-based Boeing wasn’t available to comment yesterday.

Delta also has been acquiring used jets, including five Boeing 757-200s and 33 MD-90s, and will continue to look for additional used planes, Pieper said.

“We’ll evaluate all our options,” he wrote.

Single-aisle jets made up more than 80 percent of Delta’s fleet, which totaled 821 planes as of September. Delta said in October it was keeping its order for 18 of Boeing’s wide-body 787 Dreamliners, a new plane now running three years behind schedule, while deferring deliveries into the next decade.

A Delta order of narrow-body jets also would boost engine makers that are readying a new generation of engines that are about 15 percent more fuel efficient and quieter than the models they would supplant.

The geared turbofan engine from United Technologies Corp.’s Pratt & Whitney and the Leap-X from CFM International, the venture of General Electric Co. and Safran SA of France, are the choices on the announced A320 unveiled by Airbus last month. The CSeries will run on Pratt & Whitney’s geared turbofan.

Current 737s use engines from CFM, while existing A320 models use engines from International Aero Engines, a venture led by Pratt & Whitney and London-based Rolls-Royce Group Plc.

Delta rose 10 cents to $12.61 yesterday in New York Stock Exchange composite trading. The shares fell 1.9 percent in the 12 months through yesterday.

--With assistance from Susanna Ray in Seattle and Rachel Layne in Boston. Editors: Ed Dufner, Elizabeth Wollman

To contact the reporter on this story: Mary Jane Credeur in Atlanta at
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