Delta Picks Airbus Over Boeing

Features Reuters

Delta Air Lines Inc said on Wednesday it ordered 40 Airbus planes, a deal for jets that would typically fetch a steep discount from list prices valued at about $5.6 billion.

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The order includes 30 A321 narrowbody planes as well as 10 A330-300 widebody aircraft. The aircraft are scheduled for delivery between 2015 and 2017. Delta had also considered Boeing planes for the order.

The list price for the deal is $5.6 billion, but Delta is expected to have won a steep discount after holding out longer than most of its rivals for lower prices as Airbus sought to deepen its presence in rival Boeing's domestic market.

Delta operates Boeing and Airbus aircraft. The latest deal is the first major Airbus order under the Delta brand since the carrier's 2008 acquisition of Northwest.

However, Delta has yet to join a stampede for a new generation of narrowbody jets with fuel-saving engines designed to enter service from the middle of the decade, preferring to pick up aircraft at competitive prices and manage its exposure to high fuel prices through its own recently acquired oil refinery.

Both Airbus and Boeing are offering attractive end-of-the-line prices for their existing models of narrowbody medium-haul jets in order to prevent any gaps in production during the transition to the new type.

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BOEING SAYS WORKED TO MEET DELTA NEEDS

"We worked to find a solution that met Delta's needs and made good business sense for Boeing," Boeing spokesman Tim Bader said in an email. "Delta is a highly valued customer operating more than 550 Boeing airplanes with 717s and 737-900ERs soon to join the fleet. We continue working with Delta as it looks to address future fleet needs."

Delta is updating its fleet but told Reuters earlier this year that it prefers to buy planes later in their production cycles. Chief Executive Richard Anderson told Reuters in May that Delta would wait for the upcoming generation of jets designed with updated engines to prove themselves before ordering any.

In 2011, Delta ordered 100 Boeing 737-900 extended range models due to be delivered starting later this year.

The 185-seat A321 sells for $104 million at list prices, about 9 percent less than its re-engined version due to enter service from late 2015. The jet is part of the European manufacturer's A320 family that competes with the Boeing 737.

The long-haul A330 is also part of Airbus's existing portfolio, competing on price and availability against Boeing's modern carbon-composite 787 Dreamliner.

More than three years of delay getting the 787 into service allowed Airbus to improve the A330, notes Seattle-based analyst Scott Hamilton, of Leeham Co. The expectation of the 787 killing the A330 "hasn't worked out," he said.

Delta has deferred its delivery of the 18 787s it has on order to 2020-2022. Those jets were ordered in 2005 by Northwest Airlines before it merged with Delta.

Delta doesn't like the 787 because of its many problems, including battery issues that grounded the worldwide fleet for more than three months this year, Hamilton said. "They need to see it prove itself."

Shares of Delta were up 1.7 percent to $20.17 in late morning trading.