Friday, May 19, 2017

Delta eyes big late summer order; analysts don't like Boeing's chances

Delta Air Lines may issue a request for proposals in August or September as it weighs 74 orders for either Airbus A320neo or Boeing 737 Max jets, plus an extra 75 options on more planes.

The multi-billion dollar order would be a big win for Boeing and its 737 plant in Renton, where 10,000 workers build the jetmaker's best-selling new 737 Max jets.

Scott Hamilton, the Bainbridge Island aerospace observer and Leeham News publisher, has said he thinks Boeing wants Delta to be its launch customer for the new — but so far unconfirmed — larger Max 10 jet.

Delta is being tight-lipped and won't either confirm or deny any of the reports. A Delta spokesman said the company does not comment on rumor or speculation.

The airline recently deferred a big order for Airbus wide body jets.

Delta is the only major airline that has yet to order either of the aerospace world's two leading new single aisle jets, the Boeing Max or Airbus A320neo (new engine option), preferring to sit on the sidelines so it could see which jetmakers' latest generation single aisle jet would perform the best across the airline industry.

Aerospace analysts Michel Merluzeau and Saj Ahmad both think Boeing's chance of winning the order aren't good, but for different reasons.

Merluzeau, director of aerospace market analysis at AirInsight Research, thinks the Airbus jet is the better aircraft.

Ahmad, of StrategicAero Research, thinks Boeing's Max series is the better airplane, but said other factors are at play.

"It probably wouldn't be a surprise if they went with Airbus' A320neo family," Ahmad said.

Why? Delta bought 30 A320s with their current engine option (not neos) four days ago.

Worse, Ahmad said, Boeing's decision to file an unfair trade complaint against Bombardier from Canada, amid allegations its rival dumped C-Series jets in the U.S. at unfairly low cost to secure a big Delta order could hurt its chances of winning a future Delta deal. If Boeing's complaint is upheld by U.S. trade authorities, that could result in Delta paying more for its 75 Bombardier jets.

Ahmad is not 100 percent certain that move will hurt Boeing's chances, though.

"Delta also has a rather big 737 fleet, and arguably could be seen as a launch customer for the 737 Max 10, which is almost certainly going to be formally launched at next month's Paris Air Show," Ahmad said.

If Boeing doesn't win the Delta order, it's not the end of the world, Ahmad said.

Now that the first Max has been delivered, Ahmad said, there's ample opportunity for Boeing to go after big customers like Ryanair, Southwest Airlines and others, who may order more Maxes to modernize their fleets.

(Andrew McIntosh - Puget Sound Business Journal)

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