A fascinating piece by The Air Current notes: “It was the CEOs of United Airlines, Southwest Airlines, American Airlines, and Alaska Airlines who ultimately catalyzed a change in leadership at the top of Boeing.”
Boeing’s immediate future will elicit endless chatter and debate. Hopefully, this opinion flow focuses on management talent rather than aviation. Yesterday, USAToday got this quote from industry veteran Bob Mann: “It’s a headline change. I’m not sure it makes a difference on the factory floor, and that’s really where the value or the damage is created.” And this is right on, in our view.
Back to the bigger picture – the customers that forced the earthquake-like change at Boeing over the weekend.
Delta appears to have been absent from this process. What might explain this?
In 2016, Delta canceled the 787 order placed by Northwest Airlines in 2005. The two airlines merged in 2009; the only common aircraft they operated was the 757. Delta took to Northwest’s A330 fleet and ordered more in 2013. Delta also placed its first order for A321s. Ed Bastian stated, “Delta is excited to select Airbus to partner with us as we continue our fleet renewal. These A330 and A321 aircraft offer a combination of economic efficiency and excellent customer satisfaction, which we experience with the 158 Airbus aircraft currently in our fleet.”
In 2014, Delta ordered another batch of A330s, the A330-900 and A350-900s. The chart shows how Airbus aircraft have steadily grown within the Delta fleet.
The A330-900s offer flightdeck commonality with the A330-300s, while A350-900s replaced 747s (ex-Northwest) and 777s. The A330s are replacing Delta’s 767 fleet. In 2016, Delta canceled the 787 order.
This was not a rejection of Boeing; the airline ordered 130 737-900s and took delivery of all of them. In 2022, Delta ordered 100 MAX 10s and added 30 options. On March 1, we estimated that Delta operated 162 737-900s. This is the largest fleet within Delta’s single-aisle fleet. The MAX 10s appear to replace the 737-900s, and the first MAX 10 was anticipated in 2025.
The MAX 10 order was calibrated carefully: a Bloomberg interview reported that Delta is “comfortable” with protections it negotiated against possible delays in its contract to buy the Max 10, Bastian said.
Delta can afford to be calibrated on the MAX because it wisely split its fleet commitments. The airline presciently switched to the A321 even as it kept its 757s. In 2017, Delta added 30 more A321ceos. It followed this up by moving to the A321neo, with 155 on order.
This balancing, indeed fleet derisking, played out well for Delta.
American and United are far more exposed to Boeing, while Alaska and Southwest are fully exposed to Boeing. These four airlines, therefore, have the critical mass to move Boeing’s board, and they did.
We opined on the situation at American not derisking its fleet in 2019.
Alaska Airlines CEO Ben Minicucci expressed his frustration with Boeing, saying he is “angry.” This also occurred when the airline sold its A321neo fleet to America.
United’s CEO also expressed dissatisfaction with Boeing and visited Airbus to seek a solution to United’s MAX 10 delivery delays.
On their 4q earnings call, Southwest’s CEO remarked that there is no such thing as fleet derisking. He said: “And our focus right now is on our own fleet plan, our fleet plan with Boeing, obviously working with Boeing to get the MAX 7 certified. But we do take that up periodically. You also have to understand every — I know you know this, but there isn’t — as such, there’s no such thing as being able to derisk all of this..” Southwest doubled down on the MAX 7 when it might have derisked its MAX exposure. Taking delivery of MAX 8s does not solve the airline’s key problem of replacing 737-700s.
Once again, Delta seems to sail above the tumult in the US airline industry. Is this luck or better management?
