Delta’s plan to get ahead by leading from behind
For the aviation industry, air shows are a showcase of the best manufacturers can muster, where cutting-edge aircraft like the Boeing 787 and the Airbus A350 are put through their paces in front of thousands of enthusiasts and potential buyers. At this year’s Paris Airshow, Boeing and Airbus combined to secure 902 purchase commitments and purchase options, with a total value of about $60 billion.
Yet some carriers find the allure of new airplane smell more appealing than others. While customers appreciate spending their flight time in newer planes, they also appreciate expansive networks and reasonable ticket prices. Airlines thus must balance the capital-intensive process of procuring new planes with the customer appeal and operational efficiency those planes can offer.
Between the three U.S. network carriers – United, American and Delta – there are three wildly different approaches to solving that equation. (Southwest, the fourth major carrier, flies only one type of aircraft, the Boeing 737, and has a notably different business model).
American, currently in the midst of absorbing U.S. Airways, boasts a fleet that averages 11.7 years old. United, now the smallest of the three network carriers, maintains a fleet that averages 13.6 years old. Delta operates a fleet with an average age of 17.2 years.
Counterintuitively, in spite of having the oldest fleet of the U.S. network carriers, Delta is the standard bearer of efficiency and reliability. Blogger and miles expert Gary Leff, writing on his View From the Wing Blog, reports that “only 0.03 percent of mainline flights were canceled due to maintenance and [Delta] had 45 days this summer without any maintenance cancellations.” Perhaps because of that reliability record, or as a result of its use of older planes, Delta has not been as aggressive in its pursuit of the latest and greatest that Boeing and Airbus have to offer.
Instead of paying more for newer, more efficient aircraft, Delta pays less (often much less) for less-popular and older, less-efficient aircraft. As Delta renews its fleet with high-profile purchases of next-gen planes like the Airbus A350, it also supplements its capacity with the latest models of older jets, like the Boeing 757 and the little-loved, rather unsuccessful, Boeing 717. (The latter were purchased from Southwest Airlines, which acquired them in its own purchase of AirTran).
Delta is driven by product price, availability and efficiency – in that order.
When searching for narrow-body jets – the ones most U.S. travelers fly en route from San Francisco to Cleveland for the holidays – Delta opted to forego next-generation planes in favor of the current generation or a past one. Its reasoning was simple: the older jets cost less, are available now and – while less efficient – have a well-established record of reliability. In spite of its fleet’s relative inefficiency, Delta is able to excel, in part, on the strength of its aircraft-procurement savings.
The real test of Delta’s direction will be how it is able to handle a steep increase in the cost of oil. If such a shock comes to pass, operating the oldest major fleet in the United States may be more of a liability than an advantage. Until that point, the team from Atlanta is looking like the smartest bunch in the room.
