U.S. mainline carriers are rebounding faster than others around the world, and investments in new aircraft are a sign they see recovery in their future. On Tuesday, Delta Air Lines (NYSE: DAL) announced long-term leases for seven Airbus A350-900 twin-aisle jets and the purchase of 29 used Boeing 737-900 Extended Range aircraft as travel demand picks up after a year of lockdowns and restrictions because of COVID.
The 36 aircraft fit with management’s strategy of streamlining and modernizing the fleet around fewer aircraft types. The A350s are part of a pivot to Airbus for the long-haul fleet after Delta retired its 18 Boeing 777 widebodies and put 767s on a faster exit schedule last year in a wide-ranging effort to slash expenses and use more efficient aircraft.
Delta has 37 A330 and 20 A350 large passenger aircraft on order from Airbus. Both are well suited for carrying cargo. The first new A350s are scheduled for delivery in 2022.
Earlier this year, Delta finalized an order for 25 A321 neo aircraft, which will start to deliver next year.
Delta is leasing the A350s through AerCap Holdings, which will deliver the aircraft in the third and fourth quarters. The aircraft were previously owned by LATAM Airlines, according to The Air Current, which reported the Delta deal was in the works two weeks ago. LATAM discarded its A350s earlier this year. Delta is purchasing 27 of the 737-900s from funds managed by Castlelake LP, and financing the remaining two from funds also managed by Castlelake. The planes were previously operated by Indonesian budget carrier Lion Air, The Air Current said. Delivery of the narrowbody planes is expected to be completed by the first quarter of 2022, Delta said.
Both transactions are subject to closing conditions. Terms were not disclosed, but Delta likely was able obtain the aircraft at favorable prices because there is a glut of idle aircraft with travel demand still weak in many parts of the world. Used aircraft values are much lower since the pandemic. The company’s liquidity is in better shape than many airlines coming out of the pandemic, allowing it to make capital investments and take advantage of growth opportunities. Adding used planes allows the company to keep costs lower as it works to pay off debt it took on during the industry crash
The A350-900s burn 21% less fuel than the 777s they replace. Delta currently operates 15 A350-900s and 130 737-900s.
Last month, United Airlines (NASDAQ: UAL) placed an order for 270 aircraft: 200 Boeing 737 MAXs and 70 A321 neos. In May, Alaska Airlines said it will buy 13 additional 737 MAXs and 17 new Embraer 175s for its regional fleet.
Delta reports second-quarter earnings on Wednesday, and executives have indicated they plan to reach operational breakeven this summer, as load factors rise into the mid-80 percentile. Domestic leisure demand has nearly reached pre-pandemic levels with the Transportation Security Administration checking nearly 2.2 million passengers per day at U.S. airports.
In related news, American Airlines late Tuesday said it expects to post its smallest adjusted loss – $1.2 billion – since the pandemic started. Including federal COVID grants that went to cover payroll expenses put the airline at a break even point.
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