Airbus faces setback as Delta reviews $14 billion wide-body jet order
- Delhi pollution: Air quality ‘very poor’ again, after two days of relief
- Govt raises Rs14,500 crore from Bharat 22 ETF, issue subscribed 4 times
- M&M to expand footprint in Rs1,000 crore e-rickshaw market
- Padmavati controversy: SC says no to plea to delete ‘objectionable scenes’ of movie
- North Korean women suffer discrimination, rape, malnutrition: UN
Chicago/Atlanta: Airbus SE’s expansion into Boeing Co.’s home market faces a potential setback as Delta Air Lines Inc. reviews a $14 billion purchase of the European planemaker’s two-newest wide-body models.
The Atlanta-based carrier, known as an influential and shrewd aircraft buyer, is studying its twin-aisle orders amid signs the long-range travel market is saturated, Ed Bastian, Delta’s chief executive officer, said during a quarterly earnings call Wednesday. While he didn’t name Airbus, Delta has no twin-aisle orders pending with Boeing, according to the US company’s online database.
“We continue to see excess capacity in wide-bodies as we look to the future for the industry,” Bastian said, adding that Delta, which has orders for the Airbus A350 and A330neo, is in discussions with planemakers. “We continue to look internally as to what that means for Delta. You could anticipate some reductions, I think, broadly over the next several years.”
Word of the review intensifies concerns that demand for long-haul planes is weakening as a long jet-buying binge draws to close. American Airlines Group Inc. last year deferred its A350 order, while United Continental Holdings Inc. said it may swap its A350 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 shares traded 0.6% lower at €71.51 as of 9:29 am in Paris. They closed 0.9% higher Wednesday after Bastian’s remarks, paring earlier gains of as much as 1.5%. Boeing closed down 1.4% to $176.05, the second-biggest slide among the 30 members of the Dow Jones Industrial Average.
Airbus confirmed that it is in touch with Delta, while declining to go into detail.
“It’s not appropriate for us to comment on our customers’ internal analysis,” spokeswoman Mary Anne Greczyn said by email. “However, as a leading aircraft manufacturer, Airbus continually engages our customers around the world to help optimize their fleet needs.”
The Toulouse, France-based company out-duelled Boeing for Delta’s 50-jet order in 2014 and is slated to begin delivering the first of 25 A350s later this year. They’re intended to replace the Boeing 747 jumbos that once shuttled Delta’s passengers to Asia. The airline has also ordered 25 A330neo, a model that’s yet to fly, as a replacement for its oldest Boeing 767s.
The prospect of Delta postponing or cancelling the wide-body order adds to uncertainty over Airbus’s efforts to make inroads in the US with its next-generation models.
American last year delayed A350 deliveries by an average 26 months and is due to take the first of 22 planes next year, spokesman Joshua Freed said. The planes were ordered by US Airways Group, which merged with American in 2013. United said last year it was reviewing its purchase of A350-1000s.
Delta, too, could defer orders to a schedule that better fits its demand forecasts, or shift the mix to other models, according to aviation consultant Scott Hamilton. The carrier may issue a request for proposals for single-aisle aircraft that would pit Boeing’s 737 Max against Airbus’s A321neo and will also need a mid-market aircraft, such as the lighter-weight regional A330 or the so-called 797 under consideration at Boeing, he said by email.
“At face value, the Delta statement might seem alarming,” Hamilton said. “But as so often becomes the case, the ‘review’ may not be what it seems.”
Sales of twin-aisle jets have slowed as the market absorbs a surplus after Boeing and Airbus boosted output at a 16% annual pace from 2011 through 2015, said Richard Aboulafia, an aerospace analyst at Teal Group. Late last year, Boeing announced a second cut to the production rate of its 777 jetliner amid a sales drought, while A330neo orders have stalled, he said.
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
Mary Schlangenstein and Benjamin Katz also contributed to this story.