Article in today's Wall Street Journal:
ATLANTA—A jetliner parked in a cavernous hangar here boasts a gleaming paint job, 160 pristine blue leather seats and a new-airplane smell. But this latest addition to the Delta Air Lines Inc. fleet isn't new.
Not by a long shot. The twin-engine MD-90, acquired from China Southern Airlines Co. is more than 13 years old. It is one of 49 used McDonnell Douglas MD-90s Delta is rehabbing after scooping them up from global airlines that were thrilled to get rid of a plane that no longer is built by a manufacturer that long ago was taken over by Boeing Co.
Most large carriers prefer fuel-sipping new planes with the latest high-tech gadgetry. But Delta, which has one of the oldest fleets in the U.S., is making a habit of succeeding by zigging when its rivals zag.
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Besides the MD-90s, Delta is picking up the leases on 88 Boeing 717s with an average age of 11 years from Southwest Airlines Co. The discount king was so eager to shed the leases it inherited in its purchase of AirTran Airways that it took a $137 million charge to retrofit them for Delta. Yet even with the planes' higher fuel and maintenance costs, Delta figures it is saving at least $1 billion on the MD-90 purchases, compared with buying new planes, making them roughly 10% cheaper to operate per seat than new 737s. It won't say how much the 717s are saving, but its fleet strategy executive said he is "thrilled about the deal we got."
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Today, Delta's fleet is both old and complex. It has 10 different models in its 725-aircraft mainline fleet, and the fleet's average age was 16.6 years at the end of September. The last of its 19 DC-9s, which came from Northwest, clock in at more than 34 years old, and are expected to be put out to pasture in the next year or two.
This compares with an average fleet age of about 12 years for United Continental and US Airways. Southwest's fleet is 11-years-old on average while JetBlue Airways Corp.'s planes are six years old. American Airlines has a 15-year-old fleet, but the company recently ordered 460 new aircraft.
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The used-plane strategy even helped Delta win over its 12,000 pilots, its only major unionized group, to a new labor agreement reached over the summer. The 110-seat ex-Southwest 717s will be flown by Delta pilots, not aviators at regional carriers that fly on Delta's behalf, meaning more jobs and upward mobility for the Delta cockpit crews. This will clear the way for Delta to save money by culling the number of money-losing 50-seat regional jets that its commuter partners now fly and letting the 717s fill much of that need. "Both sides saw the advantage of not doing things the old way," said Buzz Hazzard, a spokesman for the Air Line Pilots Association.
At the heart of Delta's older fleet strategy is its 2.7 million-square-foot complex of maintenance hangars and shops at Hartsfield-Jackson Atlanta International Airport, part of a unit that employs 10,000 people across the country. Delta TechOps, as the unit is called, can repair engines, paint aircraft, modify airplanes and overhaul landing gear. Last year, the profitable unit racked up $650 million in revenue, up from $25 million in 1995. Clients include the U.S. military, aircraft leasing companies and domestic and overseas carriers.
With its mechanics having 19 years of experience on average, Delta believes it has the built-in expertise to cosset its older birds. Doug Worley, a 23-year Delta mechanic in Atlanta, works on all variety of the carrier's domestic aircraft. The McDonnell Douglas planes like the DC-9s and MD-90s are "workhorses," he says. "They're pretty reliable."
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Delta isn't blind to the attractions of new aircraft, of course. Last year, it ordered 100 new Boeing 737-900s to replace older planes that will be retired. But it didn't take the newest version, which Boeing expects to roll out in 2017 with more efficient engines.
Instead, Delta bought from the end of the current production cycle, getting a better price. "It's just math," said Nat Pieper, Delta's vice president of fleet strategy and a veteran of Northwest. "Our fleet strategy is one of opportunism."