Boeing, Airbus Vie for Delta Deal
Boeing Co. and Airbus Industrie are competing to become the exclusive aircraft supplier to Delta Air Lines Inc. in an agreement that could produce an estimated $6 billion in initial orders.
The agreement would give Delta, the U.S.’s third-biggest airline, rights to buy all future jetliners at set prices, similar to an agreement Boeing struck with American Airlines last fall. Boeing is expected to have the edge because it has a wider array of planes. Its 747-400 jumbo jet, for instance, can carry 420 passengers, while the largest Airbus model holds only 350.
“We are in a very strong competition at Delta, but we have not reached any agreement,” Boeing Chief Executive Phil Condit told the European Aviation Club in Brussels on Tuesday. “Airbus is still trying very hard to sell their product.”
The news sent Boeing shares $2 higher to close at $108.125 on the New York Stock Exchange. Delta shares gained $1.125 to close at $85.75, also on NYSE.
Delta executives said the competition between Boeing and Airbus has become fierce, forcing the airline to delay a decision that was expected last month.
“Our first intent was simply to replace about two dozen of our old domestic [Lockheed] L-1011 planes,” said Delta spokesman Bill Berry. “But the manufacturers got very aggressive and there’s a good possibility we’ll end up with a total package, leading ultimately to a replacement for our narrow-body fleet as well.”
Airbus representatives declined to comment Tuesday.
In addition to its bigger family of aircraft, Boeing has another advantage over Airbus. Delta already owns hundreds of Boeing planes. The only Airbus planes Delta has owned were acquired in its purchase of Pan American’s European routes.
Airlines once tried to diversify their fleets with planes from different makers, but now are focusing on streamlining their fleets to help cut the costs of buying spare parts, maintenance and training, analysts said.
“Ideally, each airline would only fly one single brand of airplane,” said Salomon Bros. Inc. analyst Julius Maldutis. “In the long run, fleet consolidation would save millions and millions of dollars.”
Delta now has planes made by four different manufacturers--Airbus, Lockheed, Boeing and McDonnell Douglas.
The trend toward fleet simplification gained momentum in November when American Airlines’ parent, AMR Corp., struck a long-term agreement with Boeing and dropped McDonnell Douglas, which a month later agreed to be acquired by Boeing for $13.9 billion.
“Boeing set the pace with the American deal,” said Chris Tarry, an aerospace analyst with Dresdner Kleinwort Benson.
Boeing and McDonnell Douglas Corp. together have about two-thirds of the market for commercial jetliners. Airbus Industrie has the remaining third.
The Wall Street Journal on Tuesday said Boeing and Delta Chairman Ron Allen last week discussed an exclusive package like the American agreement, in which American ordered 103 planes and took purchase rights for hundreds more.
Delta on Tuesday said that Allen and other Delta executives have been meeting for months with Boeing and Airbus executives and a decision on jet orders remains a few weeks away.
