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Topic: Why Didn't Delta Order The 737 MAX?
Username: lucky777
Posted 2012-07-16 01:56:02 and read 16843 times.

I'm just curious why there wasn't an order for the MAX when they also announced the order for 100 737-900's. One has to wonder if Delta isn't putting themselves at a competitive disadvantage in the future flying around the oldest average fleet in the U.S. If i'm not mistaken, AMR has 300+ new aircraft on order and the about the same amount for UAL. Delta, meanwhile, only has the 100 orders for the -900. This of course says nothing of the massive fleet of relatively inefficient MD88/90's Delta has. AMR can't get rid of these aircraft fast enough and yet Delta seems quite content with them.

Indeed, Delta seems to have inherited the former NWA fleet strategy of flying them until the wheels fall off LOL!!!

Topic: RE: Why Didn't Delta Order The 737 MAX?
Username: Braniff747SP
Posted 2012-07-16 02:15:57 and read 16821 times.

Quoting lucky777 (Thread starter):
90's

The MD-90 and future 717 fleet are not what I would call inefficent. They are good airplanes and they are quite cheap; DL wants as many as they can get.

Topic: RE: Why Didn't Delta Order The 737 MAX?
Username: AA737-823
Posted 2012-07-16 02:22:02 and read 16794 times.

Quoting lucky777 (Thread starter):
This of course says nothing of the massive fleet of relatively inefficient MD88/90's Delta has.

You cannot lump the 88 and 90 together like that. You must consider that the MD-90 has the same engines as you find on current, modern, in-production Airbus narrowbodies, on a lighter airframe. And the airplanes are dirt cheap to acquire.

Quoting lucky777 (Thread starter):
Indeed, Delta seems to have inherited the former NWA fleet strategy of flying them until the wheels fall off LOL!!!

That strategy worked wonders for NW, there's nothing wrong with DL mimicking it... to a point.

Quoting lucky777 (Thread starter):
If i'm not mistaken, AMR has 300+ new aircraft on order

You're mistaken- it's over 450!!! LOL.


Anyhow, a fleet of 100 739ER's, lots of MD-90s, lots of 717s, and A320s is about the most versatile fleet anyone could hope for. While there are drawbacks to that, there are also benefits.

Topic: RE: Why Didn't Delta Order The 737 MAX?
Username: lucky777
Posted 2012-07-16 02:33:49 and read 16719 times.

Perhaps I should have just said MD88...but nonetheless, that's still a huge fleet of inefficient aircraft to be flying around when your competitors, who already have a younger and more efficient fleet are getting younger and more efficient by the day...I realize Delta has been hellbent on reducing capital expenditures and paying down their debt load as of late, but and it appears they're ok with a less fuel efficient than their 2 largest rivals...perhaps their reasoning behind the refinery purchase?

Topic: RE: Why Didn't Delta Order The 737 MAX?
Username: PITingres
Posted 2012-07-16 04:01:12 and read 16460 times.

Money is money. It doesn't matter whether you spend it (or save it) on cap ex or on per-trip things like fuel. Obviously Delta thinks they will be better off long term by spending a little more in fuel today and saving on lease or acquisition payments -- new airplanes aren't cheap!

I think Delta currently only has some 120 MD8x active. That's about 1/7 of their total fleet, I think, and 1/3 of their narrowbody fleet (excluding 757's). When the 717's come in, that number will probably shrink significantly. They will end up with a slightly less fuel efficient fleet (overall) for significantly less capital expenditure.

Topic: RE: Why Didn't Delta Order The 737 MAX?
Username: ghifty
Posted 2012-07-16 04:18:50 and read 16365 times.

Delta announced their 100 739ER order on August 25th.
Boeing's board officially green-lit the 737 MAX on August 30th.

^ That may have a factor.. But:

The 100 frame order is valued around $8.5bn. Had DL opted to order 100 737 MAX 9 instead, they would be paying another $1.6bn (18.6% increase). Considering that the 737 MAX is the newer more desirable offering it can probably command list price, whilst the older less desirable 737NG can only command less than list price. In such a situation, the price gap increases in favor of a 737NG order.

Also, Delta seems to have a "save money now, not later" ethic when it comes to their fleet. Look at how old their current fleet is.. in addition to the fact that they'll be receiving less-efficient but dirt-cheap MD-90s and MD-95s. If the 737 MAX 9 does end up being "16-18% better" than the outgoing A320/737NG, it will still take time for the $$$ saved to be realised. I'm inclined that Delta wanted to save money *now* and saw it fit to order the 18.6% cheaper, proven, and ready 737NG.

Topic: RE: Why Didn't Delta Order The 737 MAX?
Username: jfk777
Posted 2012-07-16 04:22:53 and read 16329 times.

DL's 100 737-900 order is to replace their 757 which are 20 to 25 years old, this is Delta's first fleet concern. Its likely Delta will order the MAX, DL has other fleet needs it has to worry about first. MD-88 are the next fleet group needing to get retired.

Topic: RE: Why Didn't Delta Order The 737 MAX?
Username: kaitak
Posted 2012-07-16 04:48:44 and read 16212 times.

My initial comment would be "give them a chance"; it's still a new design and with such a varied fleet right now, DL has to crunch a lot of numbers to see how the Max will work (or if it will) and bear in mind whether Boeing will introduce a 737 replacement and when. With such a large NB fleet, replacing every one of them - if they were to replace them all with 737 Max versions - would take several years (and then there are other airlines' requirements to factor in); DL doesn't want to acquire (say) 300 737 Max models, only to find that the type is then superseded by a new Boeing NB. So, my guess is they will go Max at some stage, but not more than 150-200.

With regard to the MD80/90/717, here's a thought. With the acquisition of NW and of the Airtran 717s, DL has probably operated almost every version of the DC9, apart from the -21 (exclusive to SAS); I know NW operated a small number of -41s, but I don't think any of these made it to DL. Starting from '65, it has operated the -10, -30, -50, MD80, MD90 and 717. That's quite a record. And, in 2015, DL will be able to mark 50 years of operations with the DC9 and its successors. I think this is the first time this has ever happened with a major carrier. I hope DL mark it somehow.

Topic: RE: Why Didn't Delta Order The 737 MAX?
Username: higherflyer
Posted 2012-07-16 07:02:35 and read 15708 times.

Delta will start receiving the 737-900's in early 2013. Delivery and availability were more of an issue for DL management. Considering Boeing's recent history with new airframe programs, the risk of a delay in the 737-9MAX was too great to take a risk. The benefits of a newer design airframe like the 737NG replacing older A320's, MD88's and B757's are big enough to not wait for the new 737MAX program that may or may not be available when promised.

Topic: RE: Why Didn't Delta Order The 737 MAX?
Username: rwy04lga
Posted 2012-07-16 07:08:49 and read 15660 times.

Maybe I'm wrong, but I think DL inherited some 40s from NWA. I'll go to that party in 2015!

Topic: RE: Why Didn't Delta Order The 737 MAX?
Username: MountainFlyer
Posted 2012-07-16 07:55:02 and read 15202 times.

Quoting higherflyer (Reply 8):
Delta will start receiving the 737-900's in early 2013. Delivery and availability were more of an issue for DL management. Considering Boeing's recent history with new airframe programs, the risk of a delay in the 737-9MAX was too great to take a risk. The benefits of a newer design airframe like the 737NG replacing older A320's, MD88's and B757's are big enough to not wait for the new 737MAX program that may or may not be available when promised.

  

Don't forget the 739s are to replace a lot of 752s. The cost of waiting four years (minimum) and extending the life of the inefficient 752s (compared to the 739) would likely far outweigh any efficiency gains by waiting for the MAX.

Rest assured, unless DL completely flips and starts ordering Airbus narrowbodies, DL will order the MAX at some point.

Topic: RE: Why Didn't Delta Order The 737 MAX?
Username: bigbird
Posted 2012-07-16 08:01:58 and read 15097 times.

DL did operate some of the DC-9-41s. They were phased out at the end of 2010.

Topic: RE: Why Didn't Delta Order The 737 MAX?
Username: KC135TopBoom
Posted 2012-07-16 09:16:50 and read 13959 times.

Quoting lucky777 (Thread starter):
Indeed, Delta seems to have inherited the former NWA fleet strategy of flying them until the wheels fall off
Quoting AA737-823 (Reply 2):
That strategy worked wonders for NW, there's nothing wrong with DL mimicking it... to a point.

Actually that has been DL's policy long before the merger with NW. Look at how long DL kept around the L-1011, B-767-200/-300 non ERs, DC-8, MD-88, DC-9 (pre NW), B-727, B-737-200/-300

Quoting AA737-823 (Reply 2):
Quoting lucky777 (Thread starter):If i'm not mistaken, AMR has 300+ new aircraft on order
You're mistaken- it's over 450!!! LOL.

300 are firm orders, the rest are an MoU.

When DL placed the order last year for the 100 B-737-900ERs they needed them to replace airplanes they will be retiring in 2013 to 2015, mostly older B-757-200s, but some older MD-88s, too. DL will place another NB order, probibly around late 2014 or early 2015, and I'm sure Boeing has told them they will reserve some slots for the B-737MAX earlier in the production phase than what most other airline customers can get.

[Edited 2012-07-16 09:20:27]

Topic: RE: Why Didn't Delta Order The 737 MAX?
Username: strfyr51
Posted 2012-07-16 09:36:58 and read 13655 times.

I don't think Delta has gotten warmed up yet. They'll need to replace their 757's and their MD-88's but they can't Mortgage the farm either while they're reducing long term debt to below $10B. That's more important than ordering new airplanes, and a better use of resources as well. Were they do get their Debt much lower they could possibly service the airplane orders from Incoming cash flow rather than financing the Debt. Remember,, Rich Anderson came from Northwest where they had a policy of OWNING their airplanes outright. But you have to put the Horse before the Cart first. Lower the long term Capital Debt and you call your OWN shots. Smart thinking!!

Topic: RE: Why Didn't Delta Order The 737 MAX?
Username: Burkhard
Posted 2012-07-16 09:37:54 and read 13653 times.

They will do so. Sure. And they will get them when they need them.

Topic: RE: Why Didn't Delta Order The 737 MAX?
Username: neutronstar73
Posted 2012-07-16 09:43:57 and read 13567 times.

Quoting MountainFlyer (Reply 10):
Don't forget the 739s are to replace a lot of 752s. The cost of waiting four years (minimum) and extending the life of the inefficient 752s (compared to the 739) would likely far outweigh any efficiency gains by waiting for the MAX.

Why, oh why do people call the 757 "inefficient"? And in the same vein, I hear people dust up the 767 as "inefficient". Do people even know what that means or they just like saying that? As compared to what?

And how did the MD90 make it into the "inefficient" category? Might as well say the A320 is, as well. Which, of course, would be ludicrous?

I'm just genuinely curious as to how the calculus stacks up to make the 757 an "inefficient" airliner.....

Topic: RE: Why Didn't Delta Order The 737 MAX?
Username: dtw9
Posted 2012-07-16 09:44:38 and read 13536 times.

Quoting KC135TopBoom (Reply 12):
When DL placed the order last year for the 100 B-737-900ERs they needed them to replace airplanes they will be retiring in 2013 to 2015, mostly older B-757-200s, but some older MD-88s, too.

The 737-900er's will replace older 757's and some 767's and A320's. They are not replacements for any MD-88's. In fact there has been recent talk that Delta has been buying Ex-AA MD-80's as a source of spares for the MD-88 fleet.

Topic: RE: Why Didn't Delta Order The 737 MAX?
Username: MountainFlyer
Posted 2012-07-16 09:59:55 and read 13313 times.

Quoting neutronstar73 (Reply 15):
Why, oh why do people call the 757 "inefficient"? And in the same vein, I hear people dust up the 767 as "inefficient". Do people even know what that means or they just like saying that? As compared to what?


The part in parenthesis from my original post says "compared to the 739" answering the question you asked.

The 752 is less efficient than the 739ER. That is a well-known fact. UA reminded us of that when they ordered some of their own just a couple weeks ago.

http://www.bloomberg.com/news/2012-0...ith-14-7-billion-boeing-order.html

Quote:
The 737-900ER is about 15 percent more fuel-efficient than the Boeing 757-200s it will replace...


[Edited 2012-07-16 10:53:02]

Topic: RE: Why Didn't Delta Order The 737 MAX?
Username: DLPMMM
Posted 2012-07-16 10:20:51 and read 12960 times.

Quoting dtw9 (Reply 16):

  

The 717s and MD-90s are being used to replace much of the the MD-88 fleet. The 717 and MD-90 both are as efficient in terms of fuel as any NB airliner currently in production.

Topic: RE: Why Didn't Delta Order The 737 MAX?
Username: SmittyOne
Posted 2012-07-16 10:22:44 and read 12922 times.

Quoting neutronstar73 (Reply 15):
Why, oh why do people call the 757 "inefficient"? And in the same vein, I hear people dust up the 767 as "inefficient". Do people even know what that means or they just like saying that? As compared to what?

And how did the MD90 make it into the "inefficient" category? Might as well say the A320 is, as well. Which, of course, would be ludicrous?

I'm just genuinely curious as to how the calculus stacks up to make the 757 an "inefficient" airliner.....

I don't think it's fair to say that the 757 is inherently inefficient (but then again I am a rabid 757 fan).

The issue is that in terms of direct operating costs (fuel, fees etc.) vs. revenue generated a 739 will beat a 752 unless you really need the 752's payload/range advantage for a route. And when you roll in higher maintenance costs of the older planes (incl upcoming heavy checks etc.) and the fact that the 757s cannot fly indefinitely due to cycle limits it starts to become more expensive (financially 'inefficient') to operate the older plane compared to the newer one - even when you take the purchase price of the new one into the equation. I believe that there are tax/depreciation issues involved too but that is over my head.

I think this point is reached later than a lot of people assume, which is why Delta and others hold onto airframes for so long once they are paid for.

Edit: Sorry, Mountainflyer beat me to it.

[Edited 2012-07-16 10:24:07]

Topic: RE: Why Didn't Delta Order The 737 MAX?
Username: FlyPNS1
Posted 2012-07-16 10:26:31 and read 12854 times.

Quoting DLPMMM (Reply 18):
The 717 and MD-90 both are as efficient in terms of fuel as any NB airliner currently in production.

True, but not as efficient as some of the future aircraft they may compete against. Keep in mind that DL will likely be flying the 717/MD90 well into the 2020's.

DL is taking a calculated risk that the savings they can get from getting used planes now will offset the hits they might take later by having a less fuel efficient fleet. DL also gets an early mover advantage by having a small mainline plane that they can use to upgauge RJ's versus carriers like UA/AA/US that will be relying on high CASM small RJ's for far longer.

Topic: RE: Why Didn't Delta Order The 737 MAX?
Username: AADC10
Posted 2012-07-16 10:27:34 and read 12851 times.

Quoting Braniff747SP (Reply 1):
The MD-90 and future 717 fleet are not what I would call inefficent.

While they are better than the really inefficient MD-88, they are still behind the 737 and there are still more than 100 MD-88s left in the fleet. Like AA, DL needs to replace the MD-80s soon and their older 757s, so 100 739s are just relatively short term replacements. DL will need a large number of aircraft and like AA, they will probably have to split the order between Boeing and Airbus because one will not be able to produce the numbers they need.

Topic: RE: Why Didn't Delta Order The 737 MAX?
Username: dtw9
Posted 2012-07-16 10:41:36 and read 12656 times.

Quoting DLPMMM (Reply 18):
The 717s and MD-90s are being used to replace much of the the MD-88 fleet. The 717 and MD-90 both are as efficient in terms of fuel as any NB airliner currently in production.

The 88's are not being replaced by 717's or MD-90's. The 90's are the DC-9-50 replacement aircraft. The 717's are the upgage aircraft for the DCI 70/76 seaters that will in turn replace the 50 seaters.If the talk of DL buying Ex-AA MD80's as a source of spares for the MD-88 fleet is true, then that should tell you that the 88's are going to be around for a while. If DL were to retire any 88's, then they would just use those retirements as a source of spares for the remainder of the active fleet.

Topic: RE: Why Didn't Delta Order The 737 MAX?
Username: catiii
Posted 2012-07-16 11:07:48 and read 12318 times.

Anderson has stated that "we're not buying shiny new objects," that at the end of the day the goal is to improve P&L and if an existing airframe can meet those goals at the fraction of the cost (i.e. used MD-90s and 717's over new 737MAXs) that diminishes the attractivness of a newer aircraft. Delta puts much more weight on ownership cost in aircraft purchases than on promised efficiency improvements.

Topic: RE: Why Didn't Delta Order The 737 MAX?
Username: xlc
Posted 2012-07-16 12:40:55 and read 11383 times.

Quoting FlyPNS1 (Reply 20):
DL is taking a calculated risk that the savings they can get from getting used planes now will
offset the hits they might take later by having a less fuel efficient fleet.

Which is why they're buying the refinery (http://news.delta.com/index.php?s=43&item=1601). It all fits together: reduce debt, stick with what you own, mitigate against your biggest weakness.

Now they just have to fight the impression that they're flying an outdated fleet (http://www.delta.com/traveling_checkin/inflight_services/products/progress.jsp).

Topic: RE: Why Didn't Delta Order The 737 MAX?
Username: blueshamu330s
Posted 2012-07-16 13:31:14 and read 11283 times.

Quoting lucky777 (Thread starter):
Why Didn't Delta Order The 737 MAX?  

Perhaps this question should be held back until after Delta order the A319 / A320neo !   

Rgds  

Topic: RE: Why Didn't Delta Order The 737 MAX?
Username: planemaker
Posted 2012-07-16 13:57:21 and read 11078 times.

Quoting xlc (Reply 24):
Which is why they're buying the refinery (http://news.delta.com/index.php?s=43&item=1601). It all fits together: reduce debt, stick with what you own, mitigate against your biggest weakness.

Another point to investigate is what the average stage length is for the MD80's. Obviously, the shorter the stage length the lower the percentage that fuel costs represent out of total trip costs. When factored against lower weight related charges, lower capital costs, etc. the MD80's could actually come out clearly ahead vs a new model depending upon stage length.

Topic: RE: Why Didn't Delta Order The 737 MAX?
Username: TeamInTheSky
Posted 2012-07-16 14:25:03 and read 10934 times.

Not that anyone is coming outright and saying that Delta is insane for not ordering new aircraft, but I also see very few heralding or applauding what Delta is doing either. I don't blame us (airliners that is) for cheering when we hear about new either WB or NB orders as we love new airplanes. But instead of lauding praise on landmark orders for airlines entering bankruptcy (AA), airlines with questionable ability to take the orders (JT), and airlines that we know won't take the orders (IT), shouldn't we applaud those airlines that are actually buying planes, keeping them, recycling parts, and making updates to the interior (which is what the flying public care about) when necessary.

What we cheer for in micro (large airplane orders regardless of the source of funding) is what has brought our economy in macro to junction we currently face. A good number of people buying what they cannot afford and putting it on credit, whether it be bank, public or private sourcing (and for these planes - normally all three).

So I am glad DL is staying on track to pay down their debt, strengthen their balance sheet, and hopefully one day look back on this decision with a smile and the flexibility to react to the market however it may change.

Kind Regards,

Team

Topic: RE: Why Didn't Delta Order The 737 MAX?
Username: fpetrutiu
Posted 2012-07-16 14:39:38 and read 10747 times.

Quoting PITingres (Reply 4):
Money is money. It doesn't matter whether you spend it (or save it) on cap ex or on per-trip things like fuel. Obviously Delta thinks they will be better off long term by spending a little more in fuel today and saving on lease or acquisition payments -- new airplanes aren't cheap!

they also aquired a refinery recently... they should be able to produce below market priced Jet A by the end of the year.

Topic: RE: Why Didn't Delta Order The 737 MAX?
Username: wjcandee
Posted 2012-07-16 20:07:26 and read 8564 times.

Quoting lucky777 (Thread starter):
competitive disadvantage in the future flying around the oldest average fleet in the U.S


If planes were free, then yes, they would be at a competitive disadvantage. Any capital expenditure to buy new planes has to be offset by either a marketing advantage (more people would fly them or they could get a higher fare) or an operational cost-saving advantage (fuel) or something else more subtle (dispatch reliability, for example, harder to quantify).

ATA Airlines had an almost entirely brand-new fleet before they went under. TWA same thing.

DL is balancing capital cost against these other factors, and, in my view, doing so brilliantly.

Topic: RE: Why Didn't Delta Order The 737 MAX?
Username: wjcandee
Posted 2012-07-16 20:12:40 and read 8545 times.

Quoting lucky777 (Reply 3):
huge fleet of inefficient aircraft

The MD88s are not so fuel-inefficient as to make it crazy to operate them. Far from it. Again, there is a cost associated with replacing them before their time would otherwise come.

Also, let's face it. We are currently awash in oil and will continue to be for a long time. That speculators have driven the price up to absurd levels is a bubble that, like all bubbles, will burst at some point, or at least deflate. Whomever has included that as a possibility, and diversified their fleet and capital expenditures to account for that possibility, will look like a genius when that time comes. Buying a refinery is a step in that direction.

Topic: RE: Why Didn't Delta Order The 737 MAX?
Username: DeltaMD90
Posted 2012-07-16 20:18:45 and read 8451 times.

They haven't ordered the MAX yet... it's not as if years have passed. It's been a relatively short time since AA and UA's order, I foresee an order in the near future (as in within 2 years.) They're doing very well now getting nice, slightly used aircraft for killer prices... seems like DL is using a save money now AND later approach. That seems to be their plan, at least

Topic: RE: Why Didn't Delta Order The 737 MAX?
Username: BoeEngr
Posted 2012-07-16 20:21:43 and read 8428 times.

I just don't think we have seen Delta look at that round yet. I suspect they will, at some point down the road, evaluate both the neo and the MAX and decide which better suits their fleet at the time.

Topic: RE: Why Didn't Delta Order The 737 MAX?
Username: N766UA
Posted 2012-07-16 21:09:50 and read 8088 times.

What do you mean "didn't?" The airplane was just announced, they have the next 20 years to place an order for it.

Topic: RE: Why Didn't Delta Order The 737 MAX?
Username: mayor
Posted 2012-07-16 21:12:45 and read 8040 times.

I think that perhaps DL didn't order the MAX at the same time as the -900 because the MAX is a few years down the road and they were probably waiting to see what happened with the 717 deal until they made up their mind. They needed the 900 sooner for 752 and 763 retirements in the next couple of years. Once they've worked out the fleet numbers, then they'll call Boeing about the MAX (unless there's already been discussions, just nothing final).

Topic: RE: Why Didn't Delta Order The 737 MAX?
Username: woodsboy
Posted 2012-07-16 21:31:36 and read 7935 times.

The subject here isnt rocket science, the MD-90 and 717 are perfectly efficient aircraft, as we have discussed here and certainly preform as well as currently produced models of 737NG and Airbus narrowbodies. There are no major increases of efficiency on the horizon past the MAX and NEO and those two upgrades just dont offer enough better operating economics to in ANY way tip the scales even remotely in favor of odering 100 NEOs or MAXs at a cost of many billions when existing fleets of 717s and MD-90s can be had for peanuts. My expectation is that the 717s and MD90s will likely be bought by Delta perhaps when leases run out (of course they do own some of the MD90s already) and at that point they will be less expensive to operate than 737NGs, MAXs or NEOs since they are A.) owned and B.)Delta will control the worldwide MX for both of these types. At some point they may indeed own every 717 and MD90 in the world as they come available.

Its a rather brilliant strategy and one that comes along so rarely that you really cant see any situation where another airline could do anything similar. By hedging their bets and acquiring almost all of a particular type of aircraft that is still modern and efficient at a very small comparative cost to new planes, you cannot loose. Nobody is competing with you with the same planes, you dont have to compete for parts because you OWN them and you become the natural home for all future 717s and MD90s that are being retired or returned to lessors. Meanwhile AMR is literally drowning in debt and may not survive even until the first delivery of their zillion new planes for a zillion dollars they dont have and when you argue that DL will be operating the oldest fleet and how can that possibly work...look at US Airways with their shiny new fleet, they must be having no trouble at all because of their efficient fleet- right? Wrong! The gas you use is but one factor in running an airline and DL has decided that while ordering some new planes is a good idea, they can gain a competitive advantage with the cheap 717s and MD90s for many years while UA, AA, US and SW will have little choice but to order new planes for their fleet upgrades. There arent any other orphan fleets out there that compare to the 717 and MD90, in my opinion it was a brilliant move.

One more thing- how wonderful will it be to have 717s replacing the horrid CRJs? I think most of us agree, the less time we have to spend on those tiny, uncomfortable jets the better.

Topic: RE: Why Didn't Delta Order The 737 MAX?
Username: planemaker
Posted 2012-07-17 00:20:50 and read 7136 times.

Quoting wjcandee (Reply 30):
Also, let's face it. We are currently awash in oil and will continue to be for a long time. That speculators have driven the price up to absurd levels is a bubble that, like all bubbles, will burst at some point, or at least deflate. Whomever has included that as a possibility, and diversified their fleet and capital expenditures to account for that possibility, will look like a genius when that time comes. Buying a refinery is a step in that direction.

The irony of ironies... now because of fracking technology Israel might join OPEC (the OPEC part is a joke but not the fracking in Israel. Some commentators are calling Israel the Saudi Arabia of shale oil.)

And then there was this headline today: Oil prices could be rigged by traders warns G20 report

And petroleum products beat out Boeing for the export crown last year for the first time.

Sure looks like a bubble. If true, then we may see aircraft production scaled back.

Topic: RE: Why Didn't Delta Order The 737 MAX?
Username: 727forever
Posted 2012-07-17 00:50:28 and read 7012 times.

Wow, there is an a lot of MD-88 hating here. I am wondering how many folks who say the -88 must go have flown them or actually know what kind of numbers they turn in. I have a hunch not many.

Keep in mind the MD-88 was the end result of continual improvement of the MD-80 family. It has similar fuel burn to the 737-300, yet carries 20-25 more passengers. While the JT-8D-219 is a noisy engine, it also was refined from the original JT-8D. The MD-80 series were the more efficient and cheaper alternative to the Boeing products before there was the A-320 to compete with. They did this by being a lighter weight airframe that was much simpler than the competition. This is also how it earned it's moniker Mad Dog as it really isn't a very nice flying airplane and can be a hand full.

As others have stated the MD-88's will be around for sometime. I would not be surprised to see them still in the DL fleet 10 years from now. As for the 737-900ER order, it fits the needs of DL now. The early 757's are timing out soon. As much as I love them, they need to go. They will be gone before the 737 Max is ready. Additionally, DL is sticking to it's very strict Capital Expenditures budget very closely. They are going to go for the best deals. Period. Right now the Max doesn't fit the current need and isn't the best deal. In time the Max will fit the need and will be ordered.

727forever

Topic: RE: Why Didn't Delta Order The 737 MAX?
Username: simairlinenet
Posted 2012-07-17 05:57:22 and read 6545 times.

I asked COO Steve Gorman this exact question at an employee Q&A last summer, and his answer discussed how Delta didn't want to buy a "paper airplane" after the 787 experience. While I think that is part of it, I suspect a bigger issue is that Boeing offered a great deal because 737NG slots were available and at a significant discount vs. waiting 1-2 years later for the MAX.

Topic: RE: Why Didn't Delta Order The 737 MAX?
Username: TrijetsRMissed
Posted 2012-07-17 21:03:54 and read 6002 times.

I think we need a lesson on ROI (return on investment) and NPV (net present value). How many of these threads are we going to read until people get it?

In DL's case, analysts have determined that the positive NPV of the MD-90 outweighs the elongated ROI received from NB 737MAX or A320NEO. For DL, the MD-90 provides immediate and superior earning power because the costs of the total assets are very economical. It may take DL 5-7 years of operating a 737MAX before the earning power matches what the MD-90 is currently providing.

I know we all like brand new shiny cars, but the secondhand MD-90 and 717 acquisitions are brilliant strategic moves. Despite what some believe of relative fuel efficiency, DL made the RIGHT decision. Pure and simple.

Quoting lucky777 (Reply 3):

Perhaps I should have just said MD88...but nonetheless, that's still a huge fleet of inefficient aircraft to be flying around when your competitors, who already have a younger and more efficient fleet are getting younger and more efficient by the day...

Are you taking into account that the majority of the MD-88 fleet is paid off in full? Or that the 50 leased frames have favorable rates? Have you calculated that into a P&L or are age (irrelevant) and fuel burn the only variables?

Quoting dtw9 (Reply 16):
In fact there has been recent talk that Delta has been buying Ex-AA MD-80's as a source of spares for the MD-88 fleet.

   Indeed. DL wants them for the engines. AA's entire fleet has the -219s. (The MD-82s were upgraded some time ago from the original -217). If acquired, this should ease some of the concern that the 717s will immediately drive out the -88s.

Quoting 727forever (Reply 37):

Wow, there is an a lot of MD-88 hating here.

It's a.net... generally speaking, there's a lot of McDonnell Douglas hating here. BTW, great post.   

Topic: RE: Why Didn't Delta Order The 737 MAX?
Username: N328KF
Posted 2012-07-17 21:19:31 and read 5960 times.

Quoting planemaker (Reply 36):
Some commentators are calling Israel the Saudi Arabia of shale oil.)

Hardly, when 2/3rds of this type of resource are in the US.

Topic: RE: Why Didn't Delta Order The 737 MAX?
Username: Vctony
Posted 2012-07-17 21:33:50 and read 5944 times.

The 737MAX has been an official product for less than a year. Delta will have a 737MAX order on the books by 2015.

Topic: RE: Why Didn't Delta Order The 737 MAX?
Username: phxa340
Posted 2012-07-17 21:38:26 and read 5927 times.

Quoting TrijetsRMissed (Reply 39):

I think we need a lesson on ROI (return on investment) and NPV (net present value).

Well said. I respect what Delta is doing. I also am happy to see them attempting to pay down debt and keep their cash. With that being said, their ROI is looking great with fuel prices down from their peaks. If DL gets themselves into a high fuel price environment , that ROI goes way down and it turns into a liability. A fleet of 100s of MD88s is a scary thought at 104/bbl like in 2011. However , I admit it would take a huge oil shock to make their MD fleet financially unviable.

Topic: RE: Why Didn't Delta Order The 737 MAX?
Username: wjcandee
Posted 2012-07-17 21:45:03 and read 5912 times.

Quoting N328KF (Reply 40):
Hardly, when 2/3rds of this type of resource are in the US.

However, the Israelis can be expected to sensibly manage whatever (largely hypothetical) risk comes from fracking, whereas in the US, some states that really need the revenue (like my beloved New York) can be expected to regulate the industry out of existence. Of course, I'm guessing that a lot of folks who benefit from high oil prices are pouring money into environmental groups who advocate a "go slow" approach. This is a big and not immediately intuitive constituency, but certainly includes all the "renewable resource" and "green jobs" folks who depend upon alternatives to their wind farms and electric cars being high-priced. And there are the folks who philosophically are opposed to cheap energy (remember Hillary's plan to add a 50-cent per gallon gasoline tax to curb consumption?) Actual science, of course, doesn't matter when you can throw around terms like "aquifer". And of course there is the game-playing over pipeline construction, and the fact that the stupid price of delivered products results in significant part from the fact that various jurisdictions have imposed a patchwork of regulations mandating a zillion different kinds of gasoline besides regular, plus and premium, without recognizing that our pipeline system isn't set up to inexpensively support moving that many subsets of liquids around like that. There are lots of palms that can be greased to take a seemingly-innocuous step (like derailing the teensy portion of TransCanada's project that actually requires approvals) that actually does nothing more than keep prices high. However, where there is a will there is a way, and although the competing interests will likely screw things up in the US, our Israeli allies will likely be in a position to start tankering a lot of that stuff our way, and prices will eventually fall to equilibrium.

The grown-ups who run DL these days have plainly done the kind of solid, diversified long-term financial planning that only adults do, and marketing kiddies don't. As with their international expansion, their fleet program is going to be studied in business schools a decade from now, and the students will be incredulous that other airlines bought into such Wall Street and consulting firm fads like "fleet simplification" on the scale that some airlines are doing it. (The point there being that there are diminishing returns to reducing aircraft types as the fleets get larger. Although your basic 23-year-old Wall Street financial analyst doesn't get it because he's caught up in analyzing certain metrics, you're not going to save much by changing a fleet of two 100-aircraft types into one fleet of 200 of the same plane, whereas you will lose the long-term benefits of diversification of risk and mission optimization.

Lastly, the MD80 haters are missing one important point about the aircraft: it's simple, its aging characteristics are predictable and well-documented (and thus easy to plan for and apply preventive maintenance techniques to keep dispatch-reliability high), and it is among the easiest aircraft to get back in business when it breaks on the line, right down to how easy it is to access stuff that may need to be changed-out -- all things that the Douglas people spent a lot of time trying to get right.

[Edited 2012-07-17 21:57:16]

Topic: RE: Why Didn't Delta Order The 737 MAX?
Username: TrijetsRMissed
Posted 2012-07-17 21:54:46 and read 5884 times.

After going through the thread a second time and reading the posts, I'm pleased to say that their are a number of quality posts by my fellow a.netters. Good job guys.

A few more things to comment on:

Quoting FlyPNS1 (Reply 20):
DL is taking a calculated risk that the savings they can get from getting used planes now will offset the hits they might take later by having a less fuel efficient fleet.

It's minimal risk if you think about. Especially with the MD-90. I'm not privy to the terms and conditions of the contracts, but these aircraft should be paid off in full in no time. It's as if they were ordered 15 years ago but just entered the fleet.

In terms of calculated risk, I guess you can apply that theory to the 763ER as well then.

Quoting planemaker (Reply 26):
Another point to investigate is what the average stage length is for the MD80's.

That's true. In 2008, when oil prices were higher than they are now, AA flew MD-83s on virtually all ORD-West Coast routes. Even now, AA is using them heavy on ORD-PHX and other 3 hour lengths.

What's the longest MD-88 route? MSP-ABQ? DTW-DEN? And those are probably shared by other types or seasonal. Widgets?

Quoting woodsboy (Reply 35):
My expectation is that the 717s and MD90s will likely be bought by Delta perhaps when leases run out (of course they do own some of the MD90s already)

IIRC, all but 3 of the MD-90s are owned. And I agree, ultimately I expect DL to purchase the 717s outright from Boeing Capital. By that time, the price should be comparable to what the MD-90s are now, minus the overhauls.

Quoting lucky777 (Thread starter):
Why Didn't Delta Order The 737 MAX? 

In 1984, people in LGB were asking the same thing. Muse Air, PSA, Republic and then the first massive AA order,... why not DL?

"And how many 757s did they sign up for???" "And they're going to retain the 72S fleet in full and look to add used -200ADV???"

Four year later DL converted an original 30+50 order to 100+100. And the rest is history....

Give it time.

Topic: RE: Why Didn't Delta Order The 737 MAX?
Username: AADC10
Posted 2012-07-18 11:29:02 and read 5444 times.

Quoting planemaker (Reply 36):
The irony of ironies... now because of fracking technology Israel might join OPEC (the OPEC part is a joke but not the fracking in Israel. Some commentators are calling Israel the Saudi Arabia of shale oil.)

And then there was this headline today: Oil prices could be rigged by traders warns G20 report

And petroleum products beat out Boeing for the export crown last year for the first time.

Sure looks like a bubble. If true, then we may see aircraft production scaled back.

Even at $30 per barrel, fuel is still a major airline expense. Airliners have a lifespan of around 25 years, depending on use and conditions, so the older planes will have to be replaced eventually and it makes sense to replace them with the most fuel efficient aircraft available at an acceptable cost.

DL will have to place a large order for next generation narrowbodies eventually. I expect DL to do an AA like split between Airbus and Boeing. UA could go all Boeing because of its relatively small order.

Topic: RE: Why Didn't Delta Order The 737 MAX?
Username: rwy04lga
Posted 2012-07-18 12:35:49 and read 5326 times.

Quoting 727forever (Reply 37):
As others have stated the MD-88's will be around for sometime. I would not be surprised to see them still in the DL fleet 10 years from now. As for the 737-900ER order, it fits the needs of DL now. The early 757's are timing out soon. As much as I love them, they need to go. They will be gone before the 737 Max is ready. Additionally, DL is sticking to it's very strict Capital Expenditures budget very closely. They are going to go for the best deals. Period. Right now the Max doesn't fit the current need and isn't the best deal. In time the Max will fit the need and will be ordered.

Well said!

Quoting N328KF (Reply 40):
Quoting planemaker (Reply 36):
Some commentators are calling Israel the Saudi Arabia of shale oil.)
Hardly, when 2/3rds of this type of resource are in the US.

Close to 4.2 quadrillion barrels

Quoting TrijetsRMissed (Reply 44):
I'm pleased to say that their are a number of quality posts by my fellow a.netters

Hear hear! It's a learning experience, I am in awe.

Just noticed...7 years on A.net, cool

[Edited 2012-07-18 12:38:26]

Topic: RE: Why Didn't Delta Order The 737 MAX?
Username: mayor
Posted 2012-07-18 13:10:17 and read 5155 times.

Quoting phxa340 (Reply 42):
If DL gets themselves into a high fuel price environment , that ROI goes way down and it turns into a liability. A fleet of 100s of MD88s is a scary thought at 104/bbl like in 2011. However , I admit it would take a huge oil shock to make their MD fleet financially unviable.

Don't forget the Trainer refinery.  


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