DL rumored to acquire used A340-600s

[WorldTraveler]

an unnamed source says Airbus is offering A340-600s to DL for not much more than DL is paying for used M90s. Rolls-Royce is apparently also throwing in engine maintenance at a pretty low price, perhaps to help win future orders.


Virgin Atlantic is supposedly the former owner as they move them out in the next few years with new aircraft.


Seven are apparently ready to deliver now with VS' fleet at 19.

Apparently at a low enough acquisition price, the economics of higher fuel burn more than offset the cost of newer aircraft.

If true, DL could obtain some ready to use large transpac capable capacity.

 

[BABABOOY]

A little late for April fools no ?

 

[WorldTraveler]

Just passing along a rumor... we'll see if it pans out....

but DL has shown that used aircraft do work when the price gets low enough. This is essentially in the class of a 773 in size with 14 hour range. Industry stats show that it burns less fuel than a 744 but is not as efficient as a 777 or the new generation widebodies. Given a price that might be equivalent to 1/5 to 1/10 of what comparable new generation aircraft cost, the fuel price becomes less of an issue.

Remember that DL just had the lowest fuel cost per gallon of any carrier that has reported for this quarter.

Remember that DL also acquired used L1011s from Eastern and used them for several years (minus the time the DEA ahad to spend to remove the cocaine from the sidewalls).

When the Trainer refinery was purchased, DL said that the refinery could deliver the fuel efficiency of 50-60 new narrowbodies but at a fraction of the price.

They are used aircraft so they won't stick around for ever. But it could give DL some cheap widebody capacity while other carriers are spending billions to acquire the same amount of new aircraft. And it could provide DL with long-range growth aircraft in the near term. If the SEA hub is going to develop as quickly as DL is indicating that it will, DL needs new large, long-range aircraft.

 

[BABABOOY]

considering how disciplined Delta has been in Intl growth since BK I find this rumor hard to believe.

 

[700UW]

There is a reason why the A340 isn't in production and was one of the worst selling widebodies and everyone is getting rid of them.

 

[whatkindoffreshhell]

"Four engines for long haul" -- remember that Airbus advertising campaign to counter the 777?  Ballsy.
 
Buy 'em WT.  Buy 'em and rule the world.

 

[WorldTraveler]

for the right price, the economics of any aircraft changes. Airbus wasn't selling them new what apparently DL is being offered now. It isn't a surprise it didn't sell when it had to compete with a 773 which is clearly a better aircraft... but it is also a whole lot more expensive, used or new.

IDK if the rumor is true but it would be classic DL (and NW) to pick up aircraft for 1/10 the price of a comparable new aircraft.

Again, far too many people in aviation chat land fail to appreciation how much money costs to borrow - and even owned aircraft are borrowed from investors.

baba,
some could be short term growth but the VS fleet is very close in size to DL's 744 fleet. Some of them likely would be used to reduce that fleet while still keeping an aircraft that could do 14 hour flights.

The A340-600 might actually have better range and performance than the 744 which might make it a good step up aircraft for routes like LAX-SYD and ATL-DXB which are strong performers but for which DL has no viable aircraft to step up to.

there might be another part to this.... Airbus has offered a price support program for owners for the A340 because the values of it fell so rapidly. DL happens to own almost half of VS. If VS participated in the Airbus price support program and DL then turns around and gets the aircraft for a fraction, then DL could be double dipping at Airbus' expense.

Not exactly a deal Airbus wants to repeat over and over again- but let's also keep in mind that DL has an RFP for 50 new generation aircraft.

DL could well make or break the prospects for the A330neo. Airbus could easily win back whatever it loses on this deal. And let's also not forget that no one else is apparently interesting in these used A340s so it is a lose less deal for Airbus.

as for the capacity discipline argument, baba, surely you have seen UA's financial results from today. They lost money - lots of it - and their performance was the worst in the Pacific but they also had revenue problems in every one of their global regions - Latin America and the Atlantic as well. When a competitor as large as UA is struggling and DL is able to generate new revenue as "easily" as DL is doing, this is exactly the time when you add capacity that could make a long-term difference in the shape of some markets like China and Hong Kong, the Middle East, and S. America. The window might not last long but DL could dramatically reshape the market by being able to respond to opportunities quickly.

 

[robbedagain]

why would dl want to use 4 engine planes from lax to syd when ua does the sfo-syd w a 2 engine 777 plane

 

[WorldTraveler]

DL also uses a 2 engine 777; DL uses the 777LR while UA uses the ER.

I'm not sure what routes DL might use a 346 on but it is a step up in size from the 777s DL has while still likely being able to do most of the routes the 777 currently operates.

 

[Kev3188]

considering how disciplined Delta has been in Intl growth since BK I find this rumor hard to believe.

 
Well, wouldja look at that; we agree on something!

 

[eolesen]

How many successful airlines are banking their future on the A346?

Now, ask yourself why they're not...

 

[WorldTraveler]

first of all, this is no more of a certainty than AA building a hub from LAX to Asia.

Second, no one is banking their future on a 10 year old aircraft.

It is very possible that the acquisition prices have fallen low enough that whatever fuel advantage aircraft like the 777-300ER has are neutralized. There is a presentation that I linked here showing that the economics of the 773 are comparable to new generation aircraft that would have cost a whole lot more even at a significant discount.

Third, the aircraft are CHEAP precisely because no one wants them. that is the way supply and demand works. No one wanted the 717s or M90s and yet DL has picked them up and they have comparable economics to existing new build aircraft.


Fourth, we still don't know how all of this fits in either to DL's ownership with Virgin Atlantic or the potential RFP for new aircraft.

And finally, DL has growth opportunities; the conference call said it and UA's pitiful results show how vulnerable they are right now.


I am hoping it is true just to prove on yet one more dimension that DL can take what everyone else says won't work and make it work for DL.

 

[eolesen]

Nice set of deflections, but there's good reason you don't see A346's in widespread service, even with cargo operators.

If DL wants 'em, good luck. They'd be better off getting a few used 333's than a subfleet of 346's.

 

[WorldTraveler]

333s don't seat 350 passengers in a typical DL configuration and they don't fly for 14 hours.

They also apparently don't have $20 million price tags which is what the market seems to say they are worth.

Given that no one is buying, the market is as low as DL or any other carrier is willing to pay.

Again, $20M is probably 1/7th to 1/10th of what a new generation comparable sized aircraft costs. for an asset that might only fly for 10 years, the difference in fuel costs is very likely not more than the extra half million to million dollars per MONTH that a newer aircraft would cost.

the difference in fuel burn between a 773 and 346 simply doesn't amount to even half a million dollars per month. Not even close.

again, people who summarily shoot a deal like this down simply don't understand the numbers that are involved whether it is true or not.

 

[traderjake]

A little late for April fools no ?

 
In this case I don't think it's month specific.