Matt Molnar
2007-06-19, 07:46 AM
Wall Street Journal (subscription required to click):
Delta May Be a Big Boeing 787 Buyer (http://online.wsj.com/article/SB118221513862839877.html?mod=home_whats_news_us)
Overseas-Growth Plan
Leads Carrier to Weigh
125 Long-Range Jets
By PAULO PRADA
June 19, 2007; Page A2
Delta Air Lines Inc., in a sign of its resurgent financial strength and willingness to spend heavily as it expands outside the U.S., is likely to order as many as 125 of Boeing Co.'s new 787 jetliners by the end of this year, its operating chief said.
The order, still being negotiated as Delta mulls potential seat configurations for the planes and how much they could cost to operate and maintain, would be valued at an estimated $20 billion at list prices, although such orders normally carry steep discounts. The 125 would likely include options to buy planes as well as firm orders.
Delta also hasn't determined exactly how many 787s it will need to fulfill its international ambitions, but the Atlanta carrier is weighing "a massive order over a long period of time," Jim Whitehurst, Delta's chief operating officer, said in an interview. Executives at the second-largest U.S. carrier by stock-market value, after Southwest Airlines Co., expect the 787 to eventually replace 104 Boeing 767s now in Delta's fleet.
Delta also is in talks with Boeing's rival Airbus about the order, a spokeswoman said. "Delta will be looking at options to modernize our fleet over the long term -- including both Boeing and Airbus -- but have made no firm plans at this time," she said. Delta currently flies no planes from Airbus, a unit of European Aeronautic Defence & Space Co.
If Delta's plans remain on track, the order would be Boeing's largest yet for the 787 from a U.S. carrier. The 787 has sold strongly since Boeing began to market it, and the Chicago company has said it wants to move at a measured pace to avoid manufacturing snafus. Boeing says the plane is sold out till almost 2015 for newcomers, but airlines such as Delta that have options from previous years should be able to get limited numbers earlier.
A major purchase also would show how aggressively Delta is striving to grow now that it has emerged from a financial tailspin that forced it into bankruptcy proceedings in 2005. Since exiting from bankruptcy in April, Delta has been forging ahead with a strategy to limit its exposure to lackluster U.S. routes while ramping up in international markets where profit margins typically are higher.
To serve non-U.S. destinations better, though, Delta needs to increase the range of its fleet by making its airplanes more efficient and replacing its aging 767s, some dating back to the 1980s, with more-modern, longer-range aircraft. The long-range, twin-aisle 787 still is being developed by Boeing but is set to make its public debut next month. It is scheduled to go into service next May, when Boeing delivers its first 787 to Japan's All Nippon Airways.
A large plane order would help Delta make up for lost time while it was slashing debts and costs and reorganizing its route network during bankruptcy. Mr. Whitehurst said Delta must "make significant expenditures on systems that we frankly starved for the last several years."
In addition to new planes, Delta plans to spend an average of more than $1.2 billion a year through 2010 on aircraft refurbishments, new baggage-handling equipment, airport improvements, updated computer systems and other improvements.
Delta is expected to announce today that it will outfit more than 60 Boeing-made 737s, 757s and 767s in its fleet with winglets, which are wing-end attachments designed to save fuel. Already used by Continental Airlines Inc. and Southwest, winglets should help Delta fly aircraft longer distances while saving up to $25 million per year on fuel costs. The project is expected to cost about $50 million, based on industry prices.
Separately, Delta's board has instructed an executive-search firm to include outside candidates in its list of possible contenders to succeed Chief Executive Gerald Grinstein, who plans to retire as soon as the company's directors can find a successor. The move isn't seen as diminishing the prospects of Mr. Whitehurst and Ed Bastian, Delta's chief financial officer, who still are considered favorites to become CEO.
In 4 p.m. composite trading on the New York Stock Exchange, Delta was at $18.54, off 34 cents, and Boeing was at $97.40, off 75 cents.
--J. Lynn Lunsford contributed to this article.
Delta May Be a Big Boeing 787 Buyer (http://online.wsj.com/article/SB118221513862839877.html?mod=home_whats_news_us)
Overseas-Growth Plan
Leads Carrier to Weigh
125 Long-Range Jets
By PAULO PRADA
June 19, 2007; Page A2
Delta Air Lines Inc., in a sign of its resurgent financial strength and willingness to spend heavily as it expands outside the U.S., is likely to order as many as 125 of Boeing Co.'s new 787 jetliners by the end of this year, its operating chief said.
The order, still being negotiated as Delta mulls potential seat configurations for the planes and how much they could cost to operate and maintain, would be valued at an estimated $20 billion at list prices, although such orders normally carry steep discounts. The 125 would likely include options to buy planes as well as firm orders.
Delta also hasn't determined exactly how many 787s it will need to fulfill its international ambitions, but the Atlanta carrier is weighing "a massive order over a long period of time," Jim Whitehurst, Delta's chief operating officer, said in an interview. Executives at the second-largest U.S. carrier by stock-market value, after Southwest Airlines Co., expect the 787 to eventually replace 104 Boeing 767s now in Delta's fleet.
Delta also is in talks with Boeing's rival Airbus about the order, a spokeswoman said. "Delta will be looking at options to modernize our fleet over the long term -- including both Boeing and Airbus -- but have made no firm plans at this time," she said. Delta currently flies no planes from Airbus, a unit of European Aeronautic Defence & Space Co.
If Delta's plans remain on track, the order would be Boeing's largest yet for the 787 from a U.S. carrier. The 787 has sold strongly since Boeing began to market it, and the Chicago company has said it wants to move at a measured pace to avoid manufacturing snafus. Boeing says the plane is sold out till almost 2015 for newcomers, but airlines such as Delta that have options from previous years should be able to get limited numbers earlier.
A major purchase also would show how aggressively Delta is striving to grow now that it has emerged from a financial tailspin that forced it into bankruptcy proceedings in 2005. Since exiting from bankruptcy in April, Delta has been forging ahead with a strategy to limit its exposure to lackluster U.S. routes while ramping up in international markets where profit margins typically are higher.
To serve non-U.S. destinations better, though, Delta needs to increase the range of its fleet by making its airplanes more efficient and replacing its aging 767s, some dating back to the 1980s, with more-modern, longer-range aircraft. The long-range, twin-aisle 787 still is being developed by Boeing but is set to make its public debut next month. It is scheduled to go into service next May, when Boeing delivers its first 787 to Japan's All Nippon Airways.
A large plane order would help Delta make up for lost time while it was slashing debts and costs and reorganizing its route network during bankruptcy. Mr. Whitehurst said Delta must "make significant expenditures on systems that we frankly starved for the last several years."
In addition to new planes, Delta plans to spend an average of more than $1.2 billion a year through 2010 on aircraft refurbishments, new baggage-handling equipment, airport improvements, updated computer systems and other improvements.
Delta is expected to announce today that it will outfit more than 60 Boeing-made 737s, 757s and 767s in its fleet with winglets, which are wing-end attachments designed to save fuel. Already used by Continental Airlines Inc. and Southwest, winglets should help Delta fly aircraft longer distances while saving up to $25 million per year on fuel costs. The project is expected to cost about $50 million, based on industry prices.
Separately, Delta's board has instructed an executive-search firm to include outside candidates in its list of possible contenders to succeed Chief Executive Gerald Grinstein, who plans to retire as soon as the company's directors can find a successor. The move isn't seen as diminishing the prospects of Mr. Whitehurst and Ed Bastian, Delta's chief financial officer, who still are considered favorites to become CEO.
In 4 p.m. composite trading on the New York Stock Exchange, Delta was at $18.54, off 34 cents, and Boeing was at $97.40, off 75 cents.
--J. Lynn Lunsford contributed to this article.