Back in October Delta‘s Richard Anderson created quite a stir when he suggested that the carrier had access to used Boeing 777-200s at the bargain price point of $10mm per plane through the secondary market. The statement drew criticism from Boeing, leasing companies and the analyst market as pretty much everyone saw the bottom falling out of their market with that price point. Oh, and Anderson claimed the market hasn’t bottomed out yet. Through all the back and forth it seems Anderson may actually have the last laugh on this one.
The latest volley in the back and forth has Anderson telling Delta employees that the $10mm offer came directly from Boeing. This changes the story line somewhat dramatically, especially as it comes to thoughts of the total cost of acquisition, including retrofit and maintenance checks. Perhaps even more spectacular was a follow-up statement in the recorded message suggesting that the price is cheap enough that Delta would consider buying the planes for parts rather than flying them. This sort of statement brings new life into discussions about a possible “bubble” in the wide-body market. No word on costs to retrofit the interiors or get any heavy maintenance checks done. But the numbers and the apparent source are quite interesting.
The type is but 20 years old and the frames, particularly the ER models with generally fewer cycles, should be viable for closer to 30. And while the aviation industry is growing overall it is not growing nearly as quickly as the new aircraft delivery pace suggests it should. IATA expects the industry to maintain an expansion pace of roughly 7% by ASMs. Fleet densification efforts (i.e. cramming more seats into planes) and the launch of more, larger jets handles a significant portion of that growth. And both Airbus and Boeing continue to deliver wide-body aircraft at a pace which exceeds the IATA growth estimates. So either we’re likely to see more growth or planes will be retired well short of their useful flying limit. And if the latter then, well, there’s that bubble.
Oops.
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The man who is in charge of this sort of thing at Delta now is the same guy who did this at Northwest. And those, like you, with long memories will recall that that’s the airline that flew 30-year-old DC-9s. (Actual DC-9s, not MD-80s.) So my personal guess is that Delta is quite serious about their hunt for bargain-basement planes on the secondary market.
This strategy clearly only works as long as Jet A prices stay reasonable.
As I understand it the major impediment to older aircraft is lower efficiency. I am not sure how much of an issue that is today at the fuel costs and future hedging that can be done today.
I am not an expert but I bet DL got away like bandits with the older MD jets they bought a few years ago.
My preference is not to fly on these bargains.
Does increased use of 777 models mean that smaller regional carriers/contractors will be pushed out? Just curious if DL would look to mainline more of that traffic or what their plans would be for increased capacity.
Well maintained 20 year old bargains are as safe as new planes. Give them a refresh and the cabin experience is as good as anything else as well you couldn’t tell the difference between 2 and 22 yrs.
Agreed!
With Delta’s spectacular TechOps division, older planes like these can fly reliably, safely, and affordably for the airline. +1 to the brilliant minds at Delta.