Desperate Boeing Giving Unprecedented Deal to Delta On 737 MAXs, But Threatens Not To Build The Planes

Two weeks ago I wrote that Delta Was on the verge of placing a Boeing order for 100 737 MAX 10 aircraft. That order is expected to come this week at the Farnborough Air Show.

Delta has been a sworn enemy of Boeing, going to far as to call them an ‘arms dealer’ to Middle East airlines (after the previous CEO claimed those airlines were complicit in 9/11). Delta has tended to buy Airbus for new planes, but CEO Ed Bastian sees this as a political liability. Both Delta and Boeing are heavily subsidized by U.S. taxpayers.

Airlines usually pay about 50% of list prices for planes so when you see deal values announced, the usual rule of thumb is to cut them in half. In this case however, Delta is probably getting an even better deal.

  • Boeing has threatened to kill the MAX 10 program unless the FAA expedites certification of the aircraft to avoid new safety requirements. A Delta deal shows momentum for the program and helps pressure political leaders.

  • The manufacturer gets a foothold in Delta’s new order book, which it’s struggled for, and that positions them better for future deals.

  • Meanwhile Delta is a notoriously tough negotiator (in a 50-50 deal, Delta takes the hyphen).

  • And this is a plane that still has baggage after the Lion Air and Ethiopian crashes and its extended grounding.

If Delta is buying new Boeing aircraft, it necessarily means they’ve gotten a nearly unprecedented deal on the planes. With Boeing losing numerous orders as a result of delays and groundings, compounded by Russian sanctions and China’s state-controlled carriers going with Airbus narrowbodies, they’re desperate to put better numbers up on the board.

Meanwhile adding these planes to their order book will likely mean making cancellation of the program even less likely and far more costly, so Boeing’s threats to legislators and regulators – already reminiscent of Cleavon Little in Blazing Saddles – ring even more hollow.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. Do I really need another reason to not fly Delta?
    Their FF program is an aberration of the major programs with a horrible value proposition

  2. The hyperbole and lies from Gary are mind-numbing.

    Delta and Boeing are not enemies. They are businesses that are focused on achieving their own goals. Delta has happened to do a better job of achieving its goals than Boeing of late.

    Delta repeatedly asked Boeing to build the NMA, a replacement for the 757 and 767, of which Delta operates nearly copies of both models combined, making Delta the largest passenger of both fleet types. The value of replacing those aircraft alone is in the tens of billions of dollars.

    But Boeing isn’t interested or capable of building replacements for those aircraft.

    Delta needs to buy something from Boeing and Boeing is who is desperate for orders for the MAX 10 and dangling an order for 100 orders from Delta in addition to orders from United could help convince Congress to pass an exemption to requirements to get the MAX10 certified. Boeing is STILL trying to get the MAX7 certified years late and on top of massive order from Southwest that Boeing can’t deliver – so Southwest is upgauging to the MAX 8.

    The price that Boeing and CFM (GE/Safran) might have to pay is to allow Delta to overhaul the LEAP engines on the MAX. Delta has engine overhaul rights not just for EVERY SINGLE ONE of the engines it has on order from Airbus but also for a large chunk of Rolls-Royce and Pratt and Whitney engines that power thousands of new generation engined aircraft around the world.

    Delta’s ability to overhaul competitors’ engines produces high margin business for Delta Tech Ops, the largest airline MRO in the Americas.

    The real rub will be if Delta wins the rights to overhaul MAX engines and American, United, Southwest, Alaska and Allegiant send their engines and money to Delta for engine overhauls.

    Delta’s fleet strategy including aircraft buying is what American and United can only wish they could have – and actual DOT data shows that Delta spends less on fleet ownership and maintenance than any other large US airline.

    Boeing needs orders for the MAX10; Delta has held out on ordering new aircraft to give Boeing a chance.

    Either Boeing will give a massive discount on its own or CFM/GE will let Delta in on the engine overhaul business for the MAX. Delta wins either way. Every other US airline is dripping with envy – which is why Gary is hellbent on manipulating the facts.

  3. Delta operates 179 Boeing 757 and 767 family aircraft right now. The MAX 10 is the first aircraft Boeing has produced that is a direct size replacement for the 757-200 even if it will have nowhere near the performance.
    As for the B787 vs. A330-900 and A350-900 of which Delta is one of the largest operators of both types, the best evidence for how Delta has gotten the better end of the deal is the fact that Delta has already received more than a dozen of both types and will get more than a dozen more while 787 customers STILL wait for their aircraft to be delivered without manufacturing defects.

    Boeing has to add the drama but the MAX 10 will be built. Delta just happens to be willing to go to Washington to plead with Boeing to get the plane built. That is hardly acrimony.

  4. 737s have a hull loss rate 5x worse than A320 series due to Boeing’s callous decision not to automate emergency checklists and make the backup cargo fire suppression system an optional add-on… FAA needs to be the adult and force Boeing into the 21st century by refusing to certify and more 20th century cockpits

  5. Esquiar,
    I believe American is the only one of the big 4 – AA, DL, UA and WN – that have had hull losses involving either the A320 or B737 family in at least 20 years and AA had one from each manufacturer.

    The MAX is now safe, US airlines are well trained, and while I prefer the wider cabin and seat width of the A320 family, the B737 MAX is a credible aircraft even though the beginning of the run until the final MAX aircraft are grounded could reach 100 years.

  6. Gary: Stop writing inaccurate sensationalist crap. As for Esquiar you are so full of it you must be an Airbus troll. What period is this totally fallacious statement made? Why dont you go back and take a look at the early history of the 320 (yes when the 737 had been flying for many years)? They used to get plunked at least once per year because of struggles between pilots and the aircraft.

  7. The sole purpose of the MCAS software on the MAX was to make the handling characteristics of the MAX similar to the NGs to keep its promise to at least one airline, WN, that no simulator time would be needed to transition to the MAX. The handling characteristics of the MAX with thrust changes was not inherently an issue, but it was different than the NGs. Obviously, BA would have been better to pay for the simulator time and ditch the MCAS workaround altogether.

  8. DL needs a replacement for the 757 and 767 fleet which the 737-10 cannot fill. What they want is a clean sheet design and Boeing refuses to build one. Failing that, the 767 is still being built as both freighters and USAF tankers. Upgrade the engines, avionics and use composites where possible and focus on the 767-400 which both DL and UA love. And passengers like the 2-3-2 coach configuration. How about a 767-500neo?

  9. I see a few reasons for this order:
    1) Geopolitical they were due for a USA order
    2) The old Northwest A319 and A320s are soon to be retired, so this order is replacing those
    3) They have a lot of Boeing 73 pilots that want to continue to be employed

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