As someone who has worked closely with Delta as a supplier for more than a decade I can tell you that this order change is probably the work of Airbus to fill in significant weaknesses in the A330 production line. I’m sure Delta readily agreed in exchange for lower A330neo price (theirs was already the same as their A330ceo) and more flexibility with future orders. This is almost the same scenario that played put with the NWA 787 order.
Delta is very smart when it comes to fleet decisions. They are brutal in negotiations and play the OEMs against each other, even when they went into the campaign with a decision made. Both Airbus and Boeing have considered no-bidding in the past since the only sure thing with a Delta campaign is that you will reduce your margins and average selling price further. The only way to change that cycle is to ignore Delta a no bid, something neither Airbus nor Boeing have had the courage to do.
So you know how much Delta paid for the 330 ceos's and neo's?
And you know that they have gone into aircraft purchase negotiations with their mind already made up? Pray tell which ones please.
My, it seems that you are privy to a lot of confidential corporate information.......information that is normally covered by non-disclosure clauses in employment contracts.......hmmm..
I never have worked for Delta or any airline, But I have read the US industry's financial reports religiously every quarter for the past 20 years. I have been tracking Delta's fleet commitments every quarter for the past 10 years and based on the changes in the financial commitments, I have been maintaining a detailed excel spreadsheet and can say with a high degree of confidence that Delta paid Airbus between $82 and 92mm (or I could just say $87mm+-5mm) for each of the 10 A330CEO's that were delivered between 2Q 2015 and 2Q 2017. Further analysis of their fleet commitments tells me they have pricing for the 25 A339 that were ordered at the same time as the 25 A359's (during Q4 2014) that results in a per frame pricing of around $91mm+-5mm for the A339 and around $124mm +-5mm for the A359's. I actually have a great deal of confidence that when they ordered those 50 aircraft during Q4 2014 they were only committing to pay right around $215mm+-5mm for each pair of A339/A359 based on the change in the aircraft commitment figure during that quarter. So perhaps my allocation of $91mm+- for the A339 and $124mm +- is not quite right, but if you want to argue that they paid $100mm (i.e. plus 10% than my estimated number) fo each A339, it necessarily means that they are getting their A359's for only $114mm each (to keep the price per pair number at around the $215mm figure)--which I don't see, based on relative demand for the A350 family.
I also study the financial reports of the other US airlines. Delta in the past 10 years has never disclosed an advance deposit line item or footnote on aircraft purchases. American and United generally do with a number of somewhere between 3% and 5% of their respective commitment position. In discussions Delta does admit to making advance payments on aircraft purchases as general text on their usage of cash flow, but I tend to think that Delta's initial purchase deposits are probably under 2% of the purchase price and therefore are not sufficiently material to merit their own separate financial statement line or foot note on Delta's quarterly and annual financial reports. Also keep in mind that Delta has strong financial statements and a purchase contract by Delta to Airbus or Boeing or Bombardier is a pretty darn strong assurance of Delta's commitments. They are not a start up airline located in a more unstable country which would be asked to post larger initial order deposits and larger progress payment deposits.
From analyzing the fleet financial commitment position and the cash flows it is possible to deduce with a great deal of confidence, certainly plus or minus a 5%, variance what Delta has committed to pay for their future aircraft deliveries. The math does not lie. I can also generally tell from the variance between my deduced fleet commitment $ number and the financial statement reported fleet $ commitment number if there was a bit more pre-delivery progress payments made during the preceding quarter, usually signalling a bit heavier delivery schedule the following quarter.
As of September 30, 2018 Delta's 10Q reported a total of $15,520,000 in aircraft purchase commitments. This per my deductions and calculations and a very minor degree of forensic accounting s-w-a-g based on some other articles and studies I have seen over the years, is accounted for by a total of 304 aircraft for which binding purchase agreements were in place on this date, consisting of:
26 B739ER's at about $43mm each, 64 A321(ceo)'s at about $42mm each, 25 A339 at about $91mm each, 14 A359 at about $122mm each, 75 CS 100 (A220-100) at about $27mm each, 100 A321neo at about $55mm each and finally 19 CR9s (Delta ordered 20 of them in June 2018, 1 of which already delivered in Sept 2018 and rest scheduled through 2020 to be operated by Skywest) at about $20mm each. Multiplying these above factors results in my deduced number of around $15.8-15.9billion in aircraft purchase commitments compared to the reported figure of $15.5bn. The difference can be explained by deposits including progress payments made during the quarter ending Sept 30, 2018. Sure I could be off by a bit on the unit purchase prices but I have a great deal of confidence that on average I am not off by more than about 5% plus or minus depending on the aircraft model.
Below are some additional observations but they may help those interested in the history of the beginnings of my excel spreadsheet:
During the years that Delta had the 18 788's on their order books, inherited from NWA, I had deduced they had a commitment cost on Delta's books of about $138mm each, Back in Q4 2010 Delta ONLY had total aircraft financial commitments of about $2.5bn. The only aircraft on their order books at Dec 31, 2010 were the 18 788's, ergo not too hard to deduce that they had a future financial commitment unit value of $138mm each. So lets assume that Northwest had given Boeing initial deposits of $5mm each, and those deposits were then inherited by post merger Delta. That is only $90mm in total deposits which could have resulted in a $143mm purchase price for each 788, But whether the 788 was on Delta's purchase commitment books at $133mm or $138mm or $143mm each, it is IMHO not a significant variance for our purposes from what the actual confidential number actually was. And during the succeeding years when the 788 program went vastly late and overweight on the early delivery units, I don't see Delta ever having been required to pay additional deposits on their 788 orders. Delta I am sure could have contractually cancelled NWA's purchase agreement and gotten all deposits back because of the non-performance by Boeing, so working out things among ''business friends'' and ordering the 739ER was a win-win for Delta and Boeing. Plus Delta by keeping the B788 on their order books for as long as they did was certainly able to get current reports fro Boeing and a better appreciation on the performance of the 788, probably eventually concluding that it was a tad small for the Delta route system that developed after 2010, especially as Delta figured they could control their Capex by keeping their 767-300ER fleet rebuilt, refurbished and running for probably 10 years longer that would have been case if management had decided to take the 788 plunge. Between Q3 2016 and Q4 2016 10Q and 10K reports you can see that Delta's aircraft commitment $ number dropped from $15.4 to 12.4bn which is the quarter when the 788's were officially cancelled. Once could conclude that the unit price of the 788's had gone up but then you have also have to factor in that the commitment position for 739ER and A321 dropped by 4 each during this quarter or another $350mm worth of aircraft deliveries , plus there was some additional fudging of the commitment numbers amounting to about $200mm as the 19 (used ex Air Canada) E190's Delta that committed to buy from Boeing Capital disappeared from the aircraft on order list during that period of time.
Bottom line, IMHO, is that Delta got a killer deal of around $87mm on the 10 ''end of the production line'' A333 (ceos) and an equally killer deal on the 25 (Delta as launch customer) and now increased to 35 A330neos. That is a lot of capacity for a relatively modest capex while keeping the same pilot pool. I will be analyzing the year end 2018 10K when it is reported to the SEC, which if the pattern for the past several years hold true, will take place sometime during the Feb 10-Feb 20 2019 time frame, to try and deduce if these additional 10 A339neos are costing significantly more than the first 25 A339neo ($91mm each +-). I suspect not.
The Original Coronado: First CV jet flights RG CV 990 July 1965; DL CV 880 July 1965; Spantax CV990 Feb 1973