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Revelation
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RE: Delta Buys 11 B777 From Singapore?

Thu Oct 15, 2015 3:35 am

Quoting tortugamon (Reply 248):

Ok, I buy that reasoning. One thing though is that you've got to be right because it has to attract buyers as well. But he probably realizes that buyers already know anyway, and he is likely the biggest buyer out there so he has an opportunity to almost set the market.

That, and/or it really is a speculative purchase i.e. you're OK if you don't get the a/c, and the only way it works is if you get an outrageously good deal, one that gives you so much margin you can afford any costs with delaying / cancelling airframes on order. Some may see this as a swipe at the A350 but keep in mind (a) I'm on record saying the A350s are so good that they will get them anyway and (b) DL also has the much-deferred ex-NW 787 order as well so it's also a swipe at the 787.
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delimit
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RE: Delta Buys 11 B777 From Singapore?

Thu Oct 15, 2015 3:35 am

Quoting Pellegrine (Reply 241):
Yeah, I forgot temporarily that DL goes after bottom of the barrel pax and uses that old, long-taught American business strategy of buy the cheapest assets you can and charge a premium price for them.

That's an odd way of typing, "is one of the most successful airlines in the industry."

Quoting Pellegrine (Reply 241):
BTW, NW didn't follow this model exclusively. They negotiated one of the best deals with Airbus for widebodies ever. They paid around $85 million per plane for their A330s.

Neither has Delta, with 350s, 321s and 737-900ERs all purchased in the last year.

Quoting Revelation (Reply 246):
Despite all the blathering about the A380 effect, airline seats are commodities and the vast majority of pax can't tell one a/c from another.

It's experience inside that counts for passengers. The A380 is nice to fly on. So is a refurbished DL 767.
Emirates economy on a 380: 32-34" pitch 18" seat width 3-4-3 across
Delta Economy on a 767: 31-32" pitch 17.9" seat width 2-3-2 across
Both have AVOD and power ports in all seats. It's basically a wash.

[Edited 2015-10-14 20:38:03]
 
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RE: Delta Buys 11 B777 From Singapore?

Thu Oct 15, 2015 5:28 am

Quoting Revelation (Reply 244):
I don't think DL minds that they are doing something different from everyone else.

Clearly they don't care, although I would be very careful if I was in their shoes. You're either the only one right or the only one wrong. You don't want to be the latter.

Quoting Revelation (Reply 244):
I've been following this for 20 years or so and the main buyer of used a/c back then was NW. They were happy to buy used DC-10s rather than new 777s, back fill with various DC/MDs etc. Also DL has a good history of doing similar things.

I think the NW angle is very overplayed. NW effectively stopped buying used airplanes after the turn of the century. Anderson wasn't even their CEO yet. 2000 was the last year they purchased a used widebody, and those airplanes were no more than ~12 years old. You have to go even farther back for DL to purchase a used widebody. This is new territory here.

NW may have been happy to buy used back then, but it left them no chance to survive the down times in the 2000s without significant shrinkage and ultimately bankruptcy. It was not a good strategy then, and I still highly question the strategy today.

Quoting DeltaB717 (Reply 247):
That plays to DL, not against it. The less other major airlines agreeing with, and trying to replicate, DL's strategy, the lower the acquisition costs are for DL! And that actually helps improve the overall efficiency / fitness for purpose of the aircraft for DL. So, really, the aircraft we're discussing are only a little behind on technology. Arguably, even that's not such a big deal... at least for narrowbodies.

It can help, and it can hurt. It eventually hurt DL for limited supply airframes like the MD-90 and 717. Prices jumped for the last few, and their availability is forever limited.

Either way the law of supply and demand limits the potential advantage DL gets by taking this strategy. Capital + operating costs equal out pretty well between the two options. But I'd argue it exposes them to more risk when the good times stop rolling.
 
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RE: Delta Buys 11 B777 From Singapore?

Thu Oct 15, 2015 8:25 am

Quoting CompensateMe (Reply 237):
We can continue to play word games, but that won't change that DL added a plethora of used aircraft in the 1990s,

There's no "word games" in what was stated. There's a definitive difference between supplementing various fleets with used aircraft here and there (nearly every airline), and becoming one of a few (or even the sole) aggregator for a fleet type that's otherwise defunct to other carriers.

Quoting Pellegrine (Reply 241):
I forgot temporarily that DL goes after bottom of the barrel pax and uses that old, long-taught American business strategy of buy the cheapest assets you can and charge a premium price for them.

Indeed, silly you.  


Quoting RayChuang (Reply 243):
That way, DL can reclaim the dominance of the former NW on transpacific flights

NW was dominant to Japan, but UA (and PA before them) was dominant in the Tpac overall, from the US side.

Someone else can do the numbers, but wouldn't be surprised if that ratio is still accurate today. Also, AA is quickly catching up: their China service (at least in routes:destinations) has equaled and, for a while, exceeded DL's.

Quoting MSPNWA (Reply 252):
I think the NW angle is very overplayed.

    
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lightsaber
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RE: Delta Buys 11 B777 From Singapore?

Thu Oct 15, 2015 11:32 am

Quoting northwestEWR (Reply 231):
Used airliners are a hard sell. Who's going to buy them besides other airlines? And who's in the market for hundreds of 777s? A few here and there, sure but there's about to be hundreds with no where to go. That = CHEAP.

For the older (e.g., 77E) models I 100% agree. Any of the less efficient aircraft will be displaced quickly. While I expect used 77W prices to drop, I do not expect the depreciation to be as bad as the 77E. That will have to wait until a number of 779s are in service.  

With low oil prices, it is worth keeping the old planes while at the same time most widebody production remains at a very high rate of production with the A350 ramping up and the A330 ramping down (so almost a wash in units).

So DL will only buy from SQ 'if the price is right.'

Quoting tortugamon (Reply 242):
I really see this as a natural bi-product of the dramatic increase in aircraft leasing which really came into its own in the last decade. Now these aircraft are easily being returned to lessors and it really has not been done on this scale with this level of predictability and systematic structure (aka 10- year lease schedules).

That is correct. Before airlines would buy and fly until they planes were scrap with the major resale transaction to freight buyers. But at this time, the freight market is not converting and a huge number of widebodies is becoming available.


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MD88Captain
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RE: Delta Buys 11 B777 From Singapore?

Thu Oct 15, 2015 12:49 pm

Here are some bullet form facts and opinions on the subject:

disregard

[Edited 2015-10-15 05:52:46]
 
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RE: Delta Buys 11 B777 From Singapore?

Thu Oct 15, 2015 12:53 pm

Quoting Md88Captain (Reply 233):
$10M purchase price w/o engines is the offer. And DAL believes the prices are coming down.

Last time I checked Dallas-Love Field wasn't on DL destination list; they pulled out in 2000 according to wiki.

But surely even Mr. Anderson can't keep refusing cheaper used 777s in favor of brand new Airbuses.
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RE: Delta Buys 11 B777 From Singapore?

Thu Oct 15, 2015 1:00 pm

Quoting MSPNWA (Reply 234):
Really no other major airline agrees with DL in acquiring used or used and uncommon airframes that are a step behind the latest in technology and efficiency.

Are UA and WN not major airlines?

UA has so far scooped up 4 used 73G's and 11 used A319's and is looking for more.

WN has scooped up a bunch of used 73G's.
 
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RE: Delta Buys 11 B777 From Singapore?

Thu Oct 15, 2015 2:17 pm

Quoting MSPNWA (Reply 252):
Clearly they don't care, although I would be very careful if I was in their shoes. You're either the only one right or the only one wrong. You don't want to be the latter.

Of course not, but there's a lot of upside being in the former. The current buzzword for this is being disruptive. We're seeing hints of how this used a/c glut might allow DL to be disruptive. Perhaps we're over-stating the value of this kind of disruption (i.e. would DL getting dozens of used 77Es cheap really disrupt the market?) but it's great fodder for conversation.

Quoting MSPNWA (Reply 252):
I think the NW angle is very overplayed. NW effectively stopped buying used airplanes after the turn of the century. Anderson wasn't even their CEO yet. 2000 was the last year they purchased a used widebody, and those airplanes were no more than ~12 years old. You have to go even farther back for DL to purchase a used widebody. This is new territory here.

Solid points.

Quoting MSPNWA (Reply 252):
NW may have been happy to buy used back then, but it left them no chance to survive the down times in the 2000s without significant shrinkage and ultimately bankruptcy. It was not a good strategy then, and I still highly question the strategy today.

The alternate strategy would have been to buy early 777s instead of used DC-10s and to replace DC-9s with various MDs -- not sure if the alternate strategy would have made NW more viable.

As above I'm questioning how important it is to have an optimum fleet strategy? Sure it matters, but is it a game changer? For instance could NW have avoided BK if they only chose a different fleet strategy, or did all the other issues doom them to BK anyway?
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RE: Delta Buys 11 B777 From Singapore?

Thu Oct 15, 2015 2:34 pm

Quoting MSPNWA (Reply 252):
I think the NW angle is very overplayed. NW effectively stopped buying used airplanes after the turn of the century. Anderson wasn't even their CEO yet. 2000 was the last year they purchased a used widebody, and those airplanes were no more than ~12 years old. You have to go even farther back for DL to purchase a used widebody. This is new territory here.

Maybe it is, but let's not pretend that NW wasn't flying around older technology longer than any other US airline. They flew the DC-10, 742, and DC-9 longer than any other US airline. You're making DL out to have a fleet made up only of antiquated types. Sure they've bought a ton of used aircraft, but that ignores the fact that they also have a lot of newer aircraft on property, and on order. They have a large and growing fleet of 739's, A321's arriving soon, and are now taking delivery of some of the newest and most capable A330's out there. In a few years time, they'll be taking delivery of technologically advanced widebody aircraft. You also ignore the fact that AA and UA are taking delivery of shiny new narrowbodies, but they also have older aircraft in their fleets. AA has the older HP and US A320's/A319's, and many of UA's A320's and A319's aren't exactly spring chickens. Besides, the MD-90 and 717 aren't exactly older technology than the A320 series and the 737NG.
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compensateme
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RE: Delta Buys 11 B777 From Singapore?

Thu Oct 15, 2015 2:54 pm

Quoting LAX772LR (Reply 253):

There's no "word games" in what was stated. There's a definitive difference between supplementing various fleets with used aircraft here and there (nearly every airline), and becoming one of a few (or even the sole) aggregator for a fleet type that's otherwise defunct to other carriers.

Fact is that DL purchased large quantities of secondhand aircraft in the 1990s, proportional to the rate NW added secondhand frames to its fleet. You can spin it, justify it, play with it anyway you'd like to, doesn't change the facts.
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RE: Delta Buys 11 B777 From Singapore?

Thu Oct 15, 2015 3:15 pm

As I worked at both NW and DL, I can say the job DL has done introducing previously owned aircraft into their fleet is a much more thorough job of updating the interiors. I'm not saying the NW planes weren't mechanically sound, but when NW took a DC-10, it still looked like a DC-10. When DL takes a used 757 for example, it now looks like a new build interior. I imagine any 777s DL took would introduce a new interior for them. Of course that might include the dreaded 10-across in coach, but new nonetheless.
 
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RE: Delta Buys 11 B777 From Singapore?

Thu Oct 15, 2015 4:37 pm

I think it's ridiculous to call the 777-200ER "old technology" and "inefficient". Are you serious? It's the same generation aircraft as the A330 and both the 77E and A330 have had PIP packages come out over the years bringing them up to par with new deliveries.

Quoting Revelation (Reply 244):
I don't think DL minds that they are doing something different from everyone else.

It's even one of the slogans: Be Delta, Be Different.

Quoting flyabr (Reply 245):
Wouldn't that ruin the resale of used 77Ws?? I can't see B getting that desperate. Plus, DL has never expressed any interest in acquiring aircraft that big.

That's going to happen regardless of anymore new orders. There are hundreds of 77Ws that will be returned on lease from the likes of EK starting in 2017. It's going to be UGLY for resale value.

Quoting Flighty (Reply 249):
Seems that the global market cannot support so many modern WBs. There is a hard limit. It will push 772ER values to zero. There is just no role for them all. Great planes, but Earth can only use a 1,000 (?) 772ER class airplanes at one time.

  

Quoting Flighty (Reply 249):
Agreed. Find RA's comments to largely confirm this thread, that DL is likely to either buy 772ERs en masse, or, negotiate new WB deals SO cheap that they are benchmarked to near-zero-value 772ERs. This thread got the wrong specifics but the idea was correct.

  
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RE: Delta Buys 11 B777 From Singapore?

Thu Oct 15, 2015 4:52 pm

Quoting northwestEWR (Reply 262):
I think it's ridiculous to call the 777-200ER "old technology" and "inefficient". Are you serious?

It is compared to A350s and 789s being delivered today.
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RE: Delta Buys 11 B777 From Singapore?

Thu Oct 15, 2015 5:12 pm

$10 million compared to $175-$250 million makes up for an awful lot of efficiency, especially with oil at $50-$70/bbl.
 
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RE: Delta Buys 11 B777 From Singapore?

Thu Oct 15, 2015 5:21 pm

Quoting northwestEWR (Reply 262):
I think it's ridiculous to call the 777-200ER "old technology" and "inefficient". Are you serious? It's the same generation aircraft as the A330 and both the 77E and A330 have had PIP packages come out over the years bringing them up to par with new deliveries.

It's all about the point of reference. The GE90s on 77E are a half generation behind the GE90s on the 777W and a full generation behind the GE9X on 778/779, and PIPs only partially close the gaps.

Put another way, if the GE90-115B was still considered to be "efficient" then there would be no need to invent a GE9X, therefore we can say the GE90 is "inefficient".
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RE: Delta Buys 11 B777 From Singapore?

Thu Oct 15, 2015 5:24 pm

Quoting Prost (Reply 264):

$10 million compared to $175-$250 million makes up for an awful lot of efficiency, especially with oil at $50-$70/bbl.

Boeing also sells add on equipment to boost efficiency of the existing 772ER fleets. UA purchased them for their large 777 fleet and I'd expect DL to do the same if they make a used 772ER purchase.

I'm not sure if Airbus sells upgrade packages for their "older" 33X aircraft though I suspect they do.
 
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RE: Delta Buys 11 B777 From Singapore?

Thu Oct 15, 2015 5:27 pm

Quoting Md88Captain (Reply 233):
And DAL believes the prices are coming down.
Quoting bmacleod (Reply 256):
Last time I checked Dallas-Love Field wasn't on DL destination list; they pulled out in 2000 according to wiki.

DAL is the stock symbol for Delta Air Lines.



Quoting northwestEWR (Reply 262):
I think it's ridiculous to call the 777-200ER "old technology" and "inefficient". Are you serious? It's the same generation aircraft as the A330 and both the 77E and A330 have had PIP packages come out over the years bringing them up to par with new deliveries.

As scribimi notes, the A330 and 777 are inefficient compared to the A350, 787 and 777X and those are now the current benchmark aircraft in the 250-400 seat category.

Yes, at "cheap" oil prices, being double-digit percentages less fuel efficient per hour is not such a negative (especially with the 777 being able to pack passengers in thanks to it's wide cabin), but when it's (back to) double what it is now...
 
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RE: Delta Buys 11 B777 From Singapore?

Thu Oct 15, 2015 5:30 pm

Quoting Stitch (Reply 267):
but when it's (back to) double what it is now...

Absent a major geopolitical incident/meltdown, oil isn't going back up that high anytime soon. The U.S. fracking operation will ramp up if oil creeps back into the $80/barrel range.

At rock bottom purchase prices, DL would have the ability if needed to park the 777s during slack periods and/or rotate them to routes where the fuel inefficiency isn't as big a deal (i.e. shorter routes).
 
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RE: Delta Buys 11 B777 From Singapore?

Thu Oct 15, 2015 5:32 pm

Quoting bmacleod (Reply 256):
Last time I checked Dallas-Love Field wasn't on DL destination list; they pulled out in 2000 according to wiki.

Delta flies 5x a day ATL-DAL with 717's.
 
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RE: Delta Buys 11 B777 From Singapore?

Thu Oct 15, 2015 5:59 pm

Quoting SonomaFlyer (Reply 266):
Boeing also sells add on equipment to boost efficiency of the existing 772ER fleets. UA purchased them for their large 777 fleet and I'd expect DL to do the same if they make a used 772ER purchase.

  

Quoting Revelation (Reply 265):
It's all about the point of reference. The GE90s on 77E are a half generation behind the GE90s on the 777W and a full generation behind the GE9X on 778/779, and PIPs only partially close the gaps.

Put another way, if the GE90-115B was still considered to be "efficient" then there would be no need to invent a GE9X, therefore we can say the GE90 is "inefficient".

Yes, but people make it sound like a DC-10. It's marginally less efficient than the 77W with PIPs and barely double digit less fuel burn compared to the A350 and 787.

At rock bottom 777 prices, there's no way the new airplanes pay for themselves in efficiency.
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RE: Delta Buys 11 B777 From Singapore?

Thu Oct 15, 2015 6:17 pm

Quoting Revelation (Reply 258):
The alternate strategy would have been to buy early 777s instead of used DC-10s and to replace DC-9s with various MDs -- not sure if the alternate strategy would have made NW more viable.

Interestingly, NW did replace the DC-10-40 series with the DC-10-30's. After the merger with RC they retired the small fleet of MD-80 aircraft and bought more DC9 -30's, -40's and -50's. IIRC there were only about 8 MD-80's that were retired and eventually scrapped.
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RE: Delta Buys 11 B777 From Singapore?

Thu Oct 15, 2015 6:52 pm

Quoting northwestEWR (Reply 270):
Yes, but people make it sound like a DC-10. It's marginally less efficient than the 77W with PIPs and barely double digit less fuel burn compared to the A350 and 787.

DC-10 is early 70s tech. 77E is late 90s tech. A350/787 are late 00s / early 10s tech especially if you consider the 787 has had a significant set of PIPs during the 10s that other a/c didn't necessarily get. So, no, 77Es aren't 40+ year old tech as are DC-10s but there's some good reasons SQ et al are willing to walk away from them, and part of that reasoning is that their replacements are more efficient.

Quoting northwestEWR (Reply 270):
At rock bottom 777 prices, there's no way the new airplanes pay for themselves in efficiency.

Again it's a matter of perspective. DL has a big investment in maintenance so they can take on older a/c relatively easily and effectively. SQ hasn't made similar investments so for them they're happier leasing the a/c and then passing them on before they need heavy MX. They end up paying a stiff cost for the new a/c, but they don't have the big spend on MX and they get a/c that are more efficient and have all-new cabins as a part of the deal. So, the new a/c surely aren't paying for themselves on the basis of fuel efficiency, they're paying themselves on the basis of overall low MX costs, high efficiency and high customer satisfaction (due to new cabins and less disruptions due to MX issues). Both are doing what they think works best for them.
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RE: Delta Buys 11 B777 From Singapore?

Thu Oct 15, 2015 7:05 pm

Quoting CompensateMe (Reply 260):
proportional to the rate NW added secondhand frames to its fleet.

...for the third time now (maybe three's a charm?), no one's saying that DL didn't add used frames at a significant rate throughout that time.
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RE: Delta Buys 11 B777 From Singapore?

Thu Oct 15, 2015 8:18 pm

Quoting Prost (Reply 264):
$10 million compared to $175-$250 million makes up for an awful lot of efficiency

As was pointed out up-thread, the $10 million figure excludes engines and nobody is paying anywhere near $250 million for an A350 or 789.
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SonomaFlyer
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RE: Delta Buys 11 B777 From Singapore?

Thu Oct 15, 2015 8:47 pm

Quoting scbriml (Reply 274):

Quoting Prost (Reply 264):
$10 million compared to $175-$250 million makes up for an awful lot of efficiency

As was pointed out up-thread, the $10 million figure excludes engines and nobody is paying anywhere near $250 million for an A350 or 789.

So apples to apples:

Used SQ 777 (lets say $12m for frame) plus $5m for engines is $17m. To that you add a "D" check (which may not be full price when negotiated with the leasing company/seller). You all should add in the interior refurbishment and paint. I think a fairly reasonable price for our hypothetical is $25m or so. Lets be generous and round up to $30m.

Even at a 40% discount you are talking $183m per 359 (2015 list is $305m) or $159m for the 789 (2015 list is $265m). While possible, its unlikely the power by hour engine maintenance is included and many airlines also have a/c maintenance as part of their leases and perhaps even for purchases. Add those amounts on top of the purchase price.

You still have a massive difference in capital costs between new and used.

From that difference (advantage to the used a/c) you subtract higher fuel use and likely higher maintenance costs (much of which is done in-house by DL).

Unless fuel gets really expensive over the next couple of years, the used a/c makes more sense. Trust that DL has already crunched the numbers and knows EXACTLY what the benefits are at a given price point for fuel.
 
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RE: Delta Buys 11 B777 From Singapore?

Thu Oct 15, 2015 9:22 pm

Quoting lightsaber (Reply 254):
That is correct. Before airlines would buy and fly until they planes were scrap with the major resale transaction to freight buyers. But at this time, the freight market is not converting and a huge number of widebodies is becoming available.

Exactly and I for one am very interested in seeing how the airlines adapt and if there will be a new business that appears as a result. I don't see these aircraft just being parked and the leasing companies taking a bath.

Quoting SonomaFlyer (Reply 268):
Absent a major geopolitical incident/meltdown, oil isn't going back up that high anytime soon. The U.S. fracking operation will ramp up if oil creeps back into the $80/barrel range.

Agreed. And what would that geopolitical meltdown look like? Crazy inflation and political turmoil in Venezuela, War with Saudi Arabia, disarray in Iraq, inflation and economic disarray in Russia, crazy issues in Brazil, outright war in Syria.....Oh wait...those are already happening. I think fracking ramps up in the $60s and hits its stride in the $70s. I don't see $80s in our near future. Goldman just said last week that there is a real chance we could see $20s...

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RE: Delta Buys 11 B777 From Singapore?

Thu Oct 15, 2015 9:30 pm

Quoting Revelation (Reply 272):
Es aren't 40+ year old tech as are DC-10s but there's some good reasons SQ et al are willing to walk away from them, and part of that reasoning is that their replacements are more efficient

It has more to do with SQ's habit of not having "old" planes than it does efficiency.
 
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RE: Delta Buys 11 B777 From Singapore?

Thu Oct 15, 2015 10:18 pm

Quoting northwestEWR (Reply 262):
I think it's ridiculous to call the 777-200ER "old technology" and "inefficient". Are you serious? It's the same generation aircraft as the A330 and both the 77E and A330 have had PIP packages come out over the years bringing them up to par with new deliveries.

It's not old technology in real terms, but in relative terms it is quite a way behind the A350 777X and 787, in addition to being a fair amount less efficient compared to the A330 on the routes they both fly.
 
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RE: Delta Buys 11 B777 From Singapore?

Thu Oct 15, 2015 10:20 pm

Quoting tortugamon (Reply 276):
Agreed. And what would that geopolitical meltdown look like? Crazy inflation and political turmoil in Venezuela, War with Saudi Arabia, disarray in Iraq, inflation and economic disarray in Russia, crazy issues in Brazil, outright war in Syria.....Oh wait...those are already happening. I think fracking ramps up in the $60s and hits its stride in the $70s. I don't see $80s in our near future. Goldman just said last week that there is a real chance we could see $20s...

I think $20s is patently unrealistic but who knows. The lower oil goes, the more money DL or other majors could make with well maintained used 777s.

The flip side is this could put a serious dent in new orders for both A and B over the next five years or so. There are tons of 772ERs and 77Ws coming off lease over that time period. The current lessees could renew the leases on good terms but airlines like EK don't do that, they move on to the next new toy. It will be fun to see how this phenomena will upend the wide body market over the next few years. Airlines like DL and their jr. partner VS are in a good position given they've been very conservative in new a/c orders and likely built in lots of flexibility into the delivery schedules. UA on the other hand is committed to huge numbers of new and expensive a/c. The will need to follow up on wide body orders given the sheer size of the 777 fleet but they may instead keep soldiering on with them till they are scrapped and adopt more of a DL approach to a/c purchases.
 
tortugamon
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RE: Delta Buys 11 B777 From Singapore?

Fri Oct 16, 2015 12:03 am

Quoting SonomaFlyer (Reply 279):
I think $20s is patently unrealistic but who knows.

I do too and even Goldman says less than 50% chance but there is a feasible set of scenarios that could lead us there. I think $40s are here for a bit.

Quoting SonomaFlyer (Reply 279):
The flip side is this could put a serious dent in new orders for both A and B over the next five years or so.

The 787 was launched when oil was in a similar place to where it is now and that is when airlines said they were craving fuel efficiency. Its funny how oil could be similar but represent such a significantly lower proportion of the airline budget than it did. Airlines are getting more efficient which is a good thing. Lets hope they don't forget.

Quoting SonomaFlyer (Reply 279):
The current lessees could renew the leases on good terms but airlines like EK don't do that, they move on to the next new toy.

We say this but if you look at EK's fleet is not like they don't operate 15 year old aircraft. They do. If the market changes and they are given a good deal on keeping the aircraft, I don't doubt they will change their plan and adapt to the hand they have been dealt.

I don't know what will happen. As has been suggesting maybe a good MRO steps up and does major improvements for entire fleets to get these aircraft back in the sky or maybe airlines themselves invest in the staff necessary to keep these aircraft flying. I don't see them being parked. A380s included (but I have zero clue where those are going)

tortugamon
 
MSPNWA
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RE: Delta Buys 11 B777 From Singapore?

Fri Oct 16, 2015 12:26 am

Quoting SonomaFlyer (Reply 275):
You all should add in the interior refurbishment and paint. I think a fairly reasonable price for our hypothetical is $25m or so. Lets be generous and round up to $30m.

For one plane it sounds like a fair estimate. It isn't quite that simple though when comparing to new. Since we're talking used aircraft that have roughly half their life used/remaining, you have to double the capital investment to equal the life span of one new airplane. However you don't have to double the higher operating and maintenance costs, since in 10-15 years you're buying another used airplane that's the same model/life position as the new airplane today.
 
SonomaFlyer
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RE: Delta Buys 11 B777 From Singapore?

Fri Oct 16, 2015 12:42 am

Quoting MSPNWA (Reply 281):
Quoting SonomaFlyer (Reply 275):
You all should add in the interior refurbishment and paint. I think a fairly reasonable price for our hypothetical is $25m or so. Lets be generous and round up to $30m.

For one plane it sounds like a fair estimate. It isn't quite that simple though when comparing to new. Since we're talking used aircraft that have roughly half their life used/remaining, you have to double the capital investment to equal the life span of one new airplane. However you don't have to double the higher operating and maintenance costs, since in 10-15 years you're buying another used airplane that's the same model/life position as the new airplane today.

Take two aircraft, one new and one used.

Add up all the costs for two over a set time period. For this situation, I think that would be ten years.

Compare the two sets of costs given various price points for Jet A....

PROFIT
 
MSPNWA
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RE: Delta Buys 11 B777 From Singapore?

Fri Oct 16, 2015 4:56 am

Quoting SonomaFlyer (Reply 282):
Take two aircraft, one new and one used.

Add up all the costs for two over a set time period. For this situation, I think that would be ten years.

Compare the two sets of costs given various price points for Jet A....

Huh? I guess this makes sense if you only plan to run your airline for 10 years...
 
Flighty
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RE: Delta Buys 11 B777 From Singapore?

Fri Oct 16, 2015 5:34 am

Quoting MSPNWA (Reply 283):
Huh? I guess this makes sense if you only plan to run your airline for 10 years...

Other poster is right. P&L 10 years from now doesn't matter that much. You can get more, better used planes 10 years from now. These are ongoing "flow" strategies anyhow. Think of it as leasing a 772ER vs leasing an A350 for 24 month periods, if that helps. There is not necessarily any difference between the financing mechanisms for a 1999 jet vs a 2016 jet. You can call up a leasing company and get either one (or get a bank loan on either one).
 
DeltaB717
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RE: Delta Buys 11 B777 From Singapore?

Fri Oct 16, 2015 6:11 am

Quoting Flighty (Reply 284):

The first post was also correct because you can only compare ownership and operating costs over the period of time when BOTH aircraft are operating which, when one of your options is a 10-year-old, is probably only 10-15 years.
 
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compensateme
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RE: Delta Buys 11 B777 From Singapore?

Fri Oct 16, 2015 1:22 pm

Quoting LAX772LR (Reply 273):

...for the third time now (maybe three's a charm?), no one's saying that DL didn't add used frames at a significant rate throughout that time.

No, but you and others are trying to invent reasons to justify these purchases to assert that DL is now copying NW's strategy. DL purchasing used 777 today is indifferent from how it purchased L10 from AC in the 1990s.

Sorry, try again.
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SonomaFlyer
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RE: Delta Buys 11 B777 From Singapore?

Fri Oct 16, 2015 1:50 pm

Quoting MSPNWA (Reply 283):

Quoting SonomaFlyer (Reply 282):
Take two aircraft, one new and one used.

Add up all the costs for two over a set time period. For this situation, I think that would be ten years.

Compare the two sets of costs given various price points for Jet A....

Huh? I guess this makes sense if you only plan to run your airline for 10 years...

Wow, not understanding the point eh? The issue is buying new a/c vs used. There is a large 359 order which is pending, a 744 fleet which is inefficient both in fuel use and more importantly mechanically and 777s coming off lease which would fit the bill nicely. DL has the maintenance infrastructure to maintain used 777s. Not coincidentally, their current 772ER fleet are fit with Trent 892s which are the same as SQs coming off of lease.

In order for any airline to make a call as to whether to buy used a/c or order new, there needs to be an analysis of the costs of each option.
 
DTWPurserBoy
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RE: Delta Buys 11 B777 From Singapore?

Fri Oct 16, 2015 2:23 pm

Quoting SonomaFlyer (Reply 287):
DL has the maintenance infrastructure to maintain used 777s.

Delta Tech Ops does incredible work. In my opinion, even more importantly is that they take individual pride of ownership in their work. Bringing used 777's online (should that come to pass), painting and installing brand new interiors (just no 10 abreast seating, please) is all in a days work for them. This is a bunch of men and women that truly love their work.
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jacobin777
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RE: Delta Buys 11 B777 From Singapore?

Fri Oct 16, 2015 3:17 pm

Quoting tortugamon (Reply 280):
Quoting SonomaFlyer (Reply 279):
I think $20s is patently unrealistic but who knows.

I do too and even Goldman says less than 50% chance but there is a feasible set of scenarios that could lead us there. I think $40s are here for a bit.

My guess is "black gold" will wind up in the $50-$60 range in the next few months. It did hit almost $51.5 last week so a $50-$60 range isn't too absurd of a value.   
"Up the Irons!"
 
MSPNWA
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RE: Delta Buys 11 B777 From Singapore?

Fri Oct 16, 2015 4:17 pm

Quoting Flighty (Reply 284):
Other poster is right. P&L 10 years from now doesn't matter that much. You can get more, better used planes 10 years from now. These are ongoing "flow" strategies anyhow. Think of it as leasing a 772ER vs leasing an A350 for 24 month periods, if that helps. There is not necessarily any difference between the financing mechanisms for a 1999 jet vs a 2016 jet. You can call up a leasing company and get either one (or get a bank loan on either one).

Read below.

Quoting DeltaB717 (Reply 285):
The first post was also correct because you can only compare ownership and operating costs over the period of time when BOTH aircraft are operating which, when one of your options is a 10-year-old, is probably only 10-15 years.

You make the plan over the life of the company, not 10-15 years. In this case the simple benchmark to use is the life of the new aircraft. What an airline company is making a plan, it is studying is how to get the most aircraft hours from the least amount of cost--production (which will turn into revenue) divided by the total costs. A new aircraft that last X amount of hours will cost X amount. To compare with used, you need to take X amount of used aircraft at X amount of cost. The baseline - hours - need to be the same.

Quoting SonomaFlyer (Reply 287):
Wow, not understanding the point eh? The issue is buying new a/c vs used.

In order for any airline to make a call as to whether to buy used a/c or order new, there needs to be an analysis of the costs of each option.

I understand it completely. It makes absolutely no sense economically, financially, etc. It's simply wrong. DL - or any other airline - isn't going to plan to operate for only 10 years. Your scenario is only applicable if that's the case. It's pretty safe to assume that DL is planning for perpetual operation, making your comparison invalid.
 
tjh8402
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RE: Delta Buys 11 B777 From Singapore?

Fri Oct 16, 2015 5:02 pm

Quoting DTWPurserBoy (Reply 288):
Delta Tech Ops does incredible work. In my opinion, even more importantly is that they take individual pride of ownership in their work. Bringing used 777's online (should that come to pass), painting and installing brand new interiors (just no 10 abreast seating, please) is all in a days work for them. This is a bunch of men and women that truly love their work.

A friend rode on a DL 767, and when the flight attendants welcomed passengers aboard, she made to the plane being proudly "American maintained" or "maintained in America". he was amused and pleased to hear that level of pride in the company's operations.
 
SonomaFlyer
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RE: Delta Buys 11 B777 From Singapore?

Fri Oct 16, 2015 5:22 pm

Quoting MSPNWA (Reply 290):
Quoting SonomaFlyer (Reply 287):
Wow, not understanding the point eh? The issue is buying new a/c vs used.

In order for any airline to make a call as to whether to buy used a/c or order new, there needs to be an analysis of the costs of each option.

I understand it completely. It makes absolutely no sense economically, financially, etc. It's simply wrong. DL - or any other airline - isn't going to plan to operate for only 10 years. Your scenario is only applicable if that's the case. It's pretty safe to assume that DL is planning for perpetual operation, making your comparison invalid.

One more time...

I'm not assuming DL is operating for ten years. The working assumption when you purchase an a/c in that age range (say 10-12 years) you project out how long you'll keep that particular aircraft. This is because DL has new a/c coming online during that time period (including the 359s) and they will want to avoid growing the number of international seats too drastically. Factor in the existing 767ER fleet and the soon-to-be retired 744 fleet along with the 33X fleet into the analysis.

The issue is new versus used. In order to compare you need to look at costs over a given time period for that asset, not assuming the airline itself only operates for ten years. Clearly a new a/c would be kept longer since (wait for it) its new. It will use less fuel and will hopefully be cheaper to maintain. However, it will be much more expensive to acquire.

Which is better for DL in the long run? That is the question. I'm happy to be corrected but I don't recall a major carrier taking on large numbers of wide body a/c used within the last decade or two.
 
burnsie28
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RE: Delta Buys 11 B777 From Singapore?

Fri Oct 16, 2015 6:08 pm

Quoting tjh8402 (Reply 291):
A friend rode on a DL 767, and when the flight attendants welcomed passengers aboard, she made to the plane being proudly "American maintained" or "maintained in America". he was amused and pleased to hear that level of pride in the company's operations.

FA should probably check their facts before saying things like this, considering its no secret that heavy maint checks are done in Asia.
 
mcg
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RE: Delta Buys 11 B777 From Singapore?

Fri Oct 16, 2015 6:38 pm

Quoting SonomaFlyer (Reply 282):
Take two aircraft, one new and one used.

Add up all the costs for two over a set time period. For this situation, I think that would be ten years.

Compare the two sets of costs given various price points for Jet A....

That's a reasonable analysis, the one thing you've got to subtract from your costs is the value of each aircraft at the end of the ten year period. I'm assuming you include acquisition costs and present value the cash flows.
 
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Revelation
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RE: Delta Buys 11 B777 From Singapore?

Fri Oct 16, 2015 7:07 pm

Quoting SonomaFlyer (Reply 292):
I'm happy to be corrected but I don't recall a major carrier taking on large numbers of wide body a/c used within the last decade or two.

IMHO what makes this such an interesting topic is that you can't use the last few decades as a guide. Airbus and Boeing are producing aircraft at far greater numbers than they did decades ago. That means lots of frames get retired each and every month. The usual destination for these would be the freighter market, but that market is stagnant and many of the key freight players are buying new a/c instead of recycling old a/c. As our resident set of oilers are clearly pointing out, there's good reason to believe cheap oil will be around for a long time. There's intense pressure between the vendors for new orders which drives more new frames into the market. There's a lot more head to head competition now. For instance over the last decade+ there wasn't much overlap between A330 and 777 yet now we see meaningful overlap between A339, B787, A350 and B77X. In short, we're seeing things set up for a perfect storm.

[Edited 2015-10-16 12:29:07]
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Wake now, discover that you are the song that the morning brings
The heart has its seasons, its evenings and songs of its own
 
flyabr
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RE: Delta Buys 11 B777 From Singapore?

Fri Oct 16, 2015 7:36 pm

Quoting burnsie28 (Reply 293):
FA should probably check their facts before saying things like this, considering its no secret that heavy maint checks are done in Asia.

I thought DL one was of the few that did heavy checks in-house??? Wow, I'm devastated!  
 
MSPNWA
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RE: Delta Buys 11 B777 From Singapore?

Fri Oct 16, 2015 7:58 pm

Quoting SonomaFlyer (Reply 292):
One more time...

You can say it as many times as you want. It won't make it right. Your analysis is for a 10-15 year airline. You can't simply compare the total costs of a new airplane that lasts 25 years versus the total costs of used model that only lasts 12. You need to push the used costs out to 25 as well, unless you plan to permanently remove that capacity from your airline in 12.

Let's go a step farther to look at the new order part. We know what DL has on order, and it's not enough to replace their fleet, let alone grow it. We can roughly evaluate where DL is at in regards to their widebody fleet. All of their planes have ages and approximate life spans. Let's go back about a year, before the 747 retirements and A330 deliveries, and for simplicity leave the international 757s out of this. DL had 145 widebody international airplanes with X amount of capacity. Assume new widebodies to last an average of 25 years or roughly 100,000-120,000 hours. DL had only 42 widebodies under the halfway mark in age, with none less than 4.5 years old. Assuming equal capacity for each aircraft and flat company capacity, the rough average is that DL will need to buy 5.8 new widebodies a year to maintain their fleet. DL had 60 new aircraft on order a year ago (I'm not counting the 787s since that order will be changed, if it happens at all) with a higher total capacity than the current aircraft they will replace. Those two orders will more than cover the 5.8 per year for when the last A339 will be delivered. If we assume the last delivery is 2022, that's 60/8 years=7.5 per year. But as we can see, DL has kicked the can down the road too many times already. They need to acquire many more airplanes than the average in the next 10-15 years if they expect to just maintain their airline, let alone grow it. And that's where the new/used debate comes in. If DL wants to shut down in 10-15 years, a used airplane is relatively very compelling. If DL wants to be a top airline 15 years from now, as they are today, used has a harder time winning the comparison.

[Edited 2015-10-16 13:13:16]
 
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DL_Mech
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RE: Delta Buys 11 B777 From Singapore?

Fri Oct 16, 2015 9:45 pm

Quoting burnsie28 (Reply 293):
FA should probably check their facts before saying things like this, considering its no secret that heavy maint checks are done in Asia.

And the JV with Aeromexico in Queretaro, Mexico:

https://www.airliners.net/uf/1158/14420152680HxrBf.jpg
This plane is built to withstand anything... except a bad pilot.

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mcg
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RE: Delta Buys 11 B777 From Singapore?

Fri Oct 16, 2015 11:56 pm

Quoting MSPNWA (Reply 297):
You can say it as many times as you want. It won't make it right. Your analysis is for a 10-15 year airline. You can't simply compare the total costs of a new airplane that lasts 25 years versus the total costs of used model that only lasts 12. You need to push the used costs out to 25 as well, unless you plan to permanently remove that capacity from your airline in 12.

Actually you can compare over a 10 time horizon. Simply include the values of the airplanes at the end of 10 years or include the cost to add a 10 year old airplane to replace the used aircraft. Either method will result in a good analysis. There are lot's of ways to look at this question, I'm sure DL uses more than one.
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