Delta’s Surprising A330-900neo Leases

Filed Under: Delta

Delta has made an interesting announcement today, which you can read into a couple of different ways.

Delta Ordering Two Additional A330-900neos

Delta is the only US airline to operate the A330-900neo, and the airline has a total of 35 of these planes on order. Currently they have four A330-900neos in their fleet, as they started service with their first one in July.

While Delta in general has a strategy of keeping older planes and maintaining them well, they are investing in their wide body fleet, as the airline also has a total of 29 Airbus A350s on order.

That’s why it’s interesting to note that Delta and Air Lease Corporate (ALC) have reached an agreement for Delta to lease two A330-900neos. These two planes, which will be powered by Rolls Royce Trent 7000 engines, are expected to be delivered in the fourth quarter of 2020.

Separately, Delta has reached an agreement with Airbus to accelerate three planned A330-900neo deliveries, with two arriving in the fourth quarter of 2020, and another in the first quarter of 2021. As a result, Delta will take delivery of seven A330-900neos in 2020.

Delta’s A330-900neo business class

What Does This Say About Delta’s Strategy?

Here’s how Greg May, Delta’s SVP of Fleet and Technical Procurement, describes the decision to lease two A330-900neos:

“These two incremental aircraft represent an opportunistic play to fulfill our near-term widebody aircraft needs for our customers and employees as older generation aircraft are retired and to support measured growth in 2021.”

Delta claims that this lease represents an “opportunistic play,” which can’t help but make me wonder just how much of a deal they got on these. Delta is known to like a deal, so overall this can’t be great news for the A330-900neo program, if ALC’s only options for these planes is giving Delta an “opportunistic” lease.

But what I find most interesting here is Delta seeing more of a near-term need for wide body aircraft, between the two leases and the accelerated delivery of other planes, not to mention the 14 A350s from LATAM.

Historically Delta is very conservative, and much of their growth in the past years has been through investments in their joint venture partners, where the partners increase the flying (with a lower cost structure), rather than Delta. However:

  • Delta is already getting an extra 14 A350s through their stake in LATAM, as they agreed to take over those planes
  • Does Delta plan on accelerating the retirement of more 767-300s, which would come as a surprise, since they seemed to previously have a timeline they were comfortable with?
  • Does Delta see a great long haul demand increase for their flights in the coming years? Most airlines are pessimistic or at a minimum cautious regarding the global economy in a couple of years.


Delta’s A330-900neo premium economy

Bottom Line

As such, an incremental lease of two A330-900neos isn’t that huge of a development. However, I still find this interesting on both sides — just how good of a deal did ALC give Delta, and also is Delta planning on growing their presence in the coming years, or simply accelerating retirement of their 767s? It sounds like it might be a combination of both, though I do wonder if there might be more to this puzzle.

It’ll be interesting to see how this plays out…

What do you make of Delta’s two A330-900neo leases, plus their accelerated A330-900neo deliveries?

Comments
  1. My hope is that looking at DL SFO-JFK flights, perhaps the 767 will be brought back as they’re shifted off international routes. Its all 757s with their terrible temperature differentials and 2-2 J. Would always prefer the older 767-300 on that route.

  2. @JBJ – I might have my wires crossed up, but I thought Delta recently announced that they will soon be running all 763’s on SFO-JFK?

  3. Could it be related to tariffs? Maybe they are hoping to get more of the planes before they expect tariffs to rise.

  4. I hope they could replace SEA-PEK’s 767 with A330neo soon, but I guess it probably wont happen until they move to PKX

  5. First off A330 has been around for 25 years. A neo shouldn’t make you think it’s a new plane. So this is same old Delta, finding old but efficient treasure. But this workhorse is going to last at least another 20 years.

    Delta having both A350-900 and A330-900 they now realize the 330neo is efficient as …..
    Maybe they are so efficient, Ed still wants to fly them at 80% load.
    Even the 787 can’t compete them on <6000 miles segment.

    So old plane, new skin, very efficient, very good price. Yep still sounds like Delta.

    Maybe a daytime ATL-GRU or DTW-GRU.

  6. Sounds very logical to me. Getting new aircraft at a sharp price? Definitely yes. Accelerating retirement of planes with significantly higher cost per revenue seat mile numbers? Again, definitely yes.

  7. With American Airlines treating us like cattle with hostile gate agents and surrily flight crews, useless miles and no perks. Delta is getting ready for the mass exit of AA frequent flyers. ( I quit AA after 7 years as an EXP) AA partners not happy with AA : QR, EY and now LA has left AA flat footed.
    Parker GET A CLUE!

  8. @Eskimo I doubt they’ll start daytime DTW-GRU. They quietly moved the nighttime service to seasonal and then cancelled it all together. Delta chooses to route everyone thru ATL so they can claim they have the busiest/largest hub in the world. Being based out of DTW, I wish they would add more Caribbean destinations during the winter months (and not just Saturday only service *eyeroll*) and European destinations during the summer months so passengers can avoid connecting thru the nightmares that are also known as AMS or CDG.

  9. My hunch is that DL is getting ahead of what they perceive as uncertainty in fuel pricing. The 330neo’s fuel burn rate is essentially the same as the 767’s, but it carries about 70 more passengers at capacity, while also offering a superior passenger experience.

    If they move the 767s to SFO-JFK, that’s a route that can be adjusted easily as market forces change and more new aircraft are delivered.

  10. Delta’s management thinks very highly of themselves, and seem to be interested in what others think of them. So claiming “opportunistic” leases sounds boastful to me. True or not, who cares? Like Delta is the only airline that knows how to negotiate multi-billion dollar deals…or a lease on 2 aircraft. GMAB.

    I’m sure ALC reached out to all airlines to assume these leases. In the end, Delta offered the MOST $, not the least.

  11. @GRUSA +1 on 2-4-2 layout. Way better in economy than 787 or A350. Plus 2-3-2 in PE means wider seat than A350 PE and only one middle seat.

  12. Keep in mind that due to cargo conversion demand driven by amazon, the 767 has historically high values now. Even for older copies.

  13. Isn’t it an extra 14 (not 4) A350s from LATAM? And now an extra two A330neos? Wonder if this is for pure expansion, or if it’s to start to plan for the retirement of older 767-300’s?

  14. SK, I’d take 2-4-2 over 3-3-3 any day. Only possible 2 middle seats, versus 3, and no possibility of having to step over two people to reach the aisle. Odds of getting a better seat definitely better with 2-4-2, in my view.

  15. I don’t think Delta intends to use the planes in their own fleet from the sounds of it. I’m sure this speaks a lot less to either companies’ current program well being or forecasts/equipment retirement schedules, and much more to do with LATAM, or even KLM, shifting (as AF/KLM did a few months back) orders and retooling fleets for better fleet integration and cohesion when all is said and done. Plus, after missing the WH meeting (probably to finish LATAM deal w/o notice) and getting called out for not buying American by President Trump (incorrectly obviously, but still), Ed Bastian wouldn’t dare retire one of largest portions of his Boeing fleet.

  16. Leasing is a short term solution for Delta to allow Boeing to figure out plans on a 797 to replace 57 and 67 fleets.

  17. @Travelingnewyorker – you’ve got that right – it is 14 A350s. 4 that are already in service with LATAM, as well as taking over 10 of their yet-to-be-delivered orders. The real interesting part is that 8 of those are for the A350-1000… I wonder if they will take them, or down gauge to the -900.

  18. Surely they’re happy with the economics of the plane. That they’re accelerating deliveries from Airbus means they simply want more of it, same thing as the leases. I don’t see it as being bad for the plane/the plane not selling well and hence being available.

    Try order a dreamliner today and it’ll get delivered tomorrow! See how fast Air Tanzania got their planes? Boeing has wide open delivery slots.

  19. @Dee,

    Sadly, highly regarded aerospace industry expert, Scott Hamilton, Editor & Publisher of a newsletter/blog called Leeham News & Analysis, posted an abstract summarizing a more detailed report behind that authoritative and influential newsletter’s paywall late yesterday that said launch of Boeing’s “767 replacement”, often referred to as the “New Midmarket Aircraft”, or “NMA” (aka Boeing 797), is “off the table for 2020”, and that the entire NMA/797 program’s future is in jeopardy as the crisis arising from the 737 MAX escalates, and at least two senior executives, Boeing CEO, Dennis Muilenburg, and Boeing Commercial Aircraft CEO, Kevin McAllister, likely to be replaced (as they, and many others should be, I might add, given the many bad decisions in recent years at Boeing, plus last week’s revelations that the company allegedly knew as early as 2016 [before obtaining regulators’ approval for entry into revenue service] of problems regarding the 737 MAX’s MCAS computer program that were discovered during simulator tests).

    Per the Leeham News report, with the two senior Boeing executives facing replacement, all major Boeing programs, and especially including launch of the NMA/797, will be subject to an internal review after the (desperately needed) new leaders are installed, and with so much yet to be known, including even the date for recertification of the 737 MAX, launch of the NMA/797 is believed to be on hold until at least 2021 (which then pushes back entry into service until 2027) – or maybe not at all if costs to salvage the 737 MAX – assuming the model can be salvaged at all as a prolonged grounding risks triggering cancellation clauses that could imperil the future of the company’s biggest selling model and until now, cash cow, that would deprive the company of resources to launch the NMA as it scrambles to accelerate launch of a New Single Aisle (or NSA) replacement for the 737 MAX.

    So, it’s also possible that Delta is hedging its bets regarding launch of the NMA/797 by bulking up on LATAM’s wide-body Airbus A350-900s and the additional six A330-900neos via the four accelerated deliveries from the manufacturer plus the two “opportunistic leases” from ALC as a delayed (or outright canceled) launch of the NMA/797 will force airlines that were already known to be interested in that delayed/no longer available Boeing mid-sized “767 replacement” twin-aisle such as United (and Delta) to come up with new plans to fill the sudden gap in their fleets.

    So, much as Delta’s recent adjustments for its wide-body fleet may suggest sluggish sales for Airbus’s newest wide-bodies, it’s also possible that Delta fears a longer than expected delay in the launch of its much anticipated until now 767 replacement by Boeing, or even the risk of outright cancellation, of the NMA/797, and recent adjustments to its future wide-body fleet plans are intended as an hedge against one of the world’s only two wide-body aircraft manufacturers appearing to enter a period of (self-inflicted) crisis and uncertainty that industry insiders believe at a minimum will result in a delayed launch of the NMA/797 – or possibly even no launch at all (which I suspect would be presented as an indefinite postponement awaiting advancements in engine technologies, market analysis, etc., instead of outright cancellation, if that happens).

    All that’s known for sure right now is that Boeing’s years of myopic business strategy of focusing predominantly on “enhancing shareholder value” (aka diverting tens of billions to fund obscenely generous share buybacks) at the expense of investing in the company’s future, which was a major force behind its short-sighted, and now proven to have been ill-considered, attempt to drive the (ancient and long ago technologically obsolete) 737 “to the MAX” instead of launching its own, all new, 21st century “clean sheet” single aisle model, has now been exposed as the risky, flawed, greed-driven strategy (that I have been arguing since Oct 2017) that it always was, and now everyone else, too, sees, is, what with the $8 billion (and counting) cost arising from the grounding of the problem plagued 737 MAX.

    One thing we do know is that Boeing is now officially entering a period of uncertainty where its long – and growing – list of problems from years’ of being consumed with “enhancing shareholder value” will come into sharper focus, and areas that were neglected and in need of restoration will be revealed.

    And if what’s already known is any indication, the picture likely won’t be pretty.

  20. https://leehamnews.com/2019/10/21/nma-off-the-table-in-2020-and-maybe-entirely/

    This is the link to the Leeham News summary referenced in my reader comments above re Boeing.

    It was posted separately as it has been my experience that reader comments posts that include links at most web sites are subject to lengthy delays while the await review and approval for publication.

    So, it seemed appropriate to post tat link separately in case there’s any delay before it becomes available here at OMAAT.

  21. Just hope they fit better seats on the 330 in D1 – I find the suites seat totally uncomfortable, with the seat joints right where your hip is if you’re a side sleeper.

    Its such a shame, the A359 is a stunning aircraft, but the seats simply aren’t as comfortable as the HB330.

    And out of DTW Delta seriously need to up the cleaning service – my D1 Suite last week was gross – when I wiped it down the wipes were black!

  22. @Howard Miller
    @Dee

    Or Delta is just more impressed with the cheaper (good deal) Airbus planes and hates to experiment with new planes. Look at the 787 from battery fire to engines is a good example of DL (exNW) being North America launch customer to not a customer.

    Now normally, I wound’t think DL will get 797 or even 777X. But with Boeing’s meltdown brings their commercial aviation close to collapse, DL might score some great deals for these planes.

  23. Updating from comments posted earlier today:

    It’s official, Boeing Commercial Aircraft CEO, Kevin McAllister, is out.

    That’s one (1) of the two (2) Boeing leaders referenced at the Leeham News & Analysis link that’s out in the long overdue, but mercifully now underway, housecleaning that’s so desperately needed at Boeing.

    Yay! Better late than never!

  24. @Eskimo,

    Absolutely! Could be that, too.

    Whatever the reason, which I imagine Lucky (or others) will find out soon enough and report about, as someone who prefers the Airbus A330 with its 2-4-2 Economy cabins over virtually all other aircraft (other than similarly configured A340s or 2-3-2 767s) since the vast majority of our flying is in Economy class, news that Delta is adding six more A330s next year is GREAT news.

    The more the merrier!

    Soooooo much better than any 9-abreast Boeing 787 for Economy class flyers.

  25. There were a few A330neos in order from WOW and XL France before they folded. Those were probably leased from financing companies. Delta probably just got a good deal in leasing them.

  26. Please, please, PLEASE put these on your New HNL-HND flights next year. Delta went from having their best widebody plane—the 747-400–to their worst—the 767-300.

  27. I think this could be potentially two-fold: simplifying the fleet and retiring older models. With the extra aircraft coming in, they could opt to retire their 777 fleet as the oldest ones are now 20 years old with the newest already at 9 years. However, I don’t see this happening soon as they just refurbished them with P.S. and the new Delta One suites. The extra aircraft though suggests this could be in the works later on in the mid-2020s as they continue to express their desired for “measured growth”. They most likely use this to accelerate retirement plans of the 767-300 series. Some -300s and all -400s will continue to stick around for about 10 years or so as they complete a refurbishment program, adding P.S. and new Delta One (semi-suite) seats over the next couple of years. Overall, I don’t see major net wide-body growth for Delta but expect to see average available seat miles in this segment increase a bit due to the larger aircraft size and distance capability.

  28. @GuruJanitor. Thanks for the intel That is welcome news as it opens up space in J even if it’s a bit old.

    Where did you see the news?

  29. My guess? Delta has seen good demand for P.E. on the 339s and A350s. The cost to refit the 767s with 2-2-2 P.E. vs. the payoff may not be that great, and it does seem that Airbus (and Boeing) are having some challenges with skyline in the twin aisle order book — so yes the lease rates might be pretty nice.

    I like the 767s for their C+ sub-cabin, but the planes are getting a bit long in the tooth. If they figured out maybe deleting the ex-Gulf sub-fleet or another smaller set, and going with more efficient 339s, great!

  30. I also think the prospects for Jet Airways return to service look slim? DL has added flights to India, and needs lift for that, one imagines.

Leave a Reply

Your email address will not be published. Required fields are marked *