Jacob,
It is only a hypocrisy because you don’t want to see the facts.
Even if we look only at the five year part of the order, AA has tens of millions of dollars more aircraft on order than DL and yet they aren’t going to gain a cost advantage for it.
DL has TEN widebody aircraft on order…. How many does AA have? DL can figure out how to make their older 744s and 767s work for several more years but AA feels like they have to buy new 787s while DL is buying 10 current generation aircraft – but that happen to have lower CASM than the 787s that AA will be buying.
AA will be buying more than 250 new narrowbody aircraft while DL will buy half that number; the narrowbody aircraft that DL will be buying are the lowest CASM aircraft available and will generate cost savings as large as what AA is buying. DL is buying and leasing ten year old 717s and M90s that have CASMs as good as if not better than what AA is buying.
DL also said that they could finance the M90, 717, and 737-900ER fleet transitions with internally generated funds…. And since DL has been spending about $1B/year on capex with internally generated funds and that is what these transactions have/will cost DL, there is no reason to believe they can’t do the same. DL didn’t make that statement about the Airbus order that was just announced – but they are spending less than $3B and probably a lot less on those aircraft. Airbus said that “Boeing was desperate” which obviously means that Airbus had to cut the price very, very deeply, something they weren’t afraid to do to win over the first Airbus order from DL in 20 years.
But again, it isn’t just DL. WN is buying new aircraft but also forcing down CASM using far lower expenditures.
DL and WN are both comfortable that they don’t need to replace every non-current generation aircraft – because they can control the costs of operating those aircraft, they have enough short-haul segments for which the latest generation aircraft will not deliver the benefit necessary to offset the costs, and also because they can generate the revenue necessary to cover the higher costs of operating those older aircraft. AA is in the position it is in now because they have lost revenue at a far faster rate than other airlines over the past 10 years and the pace will only accelerate with the fall of the Wright Amendment, Open Skies in AA’s top markets in Latin America, and the DL/VS joint venture which will give AA the first meaningful challenge it has had in some of its top LHR markets.
I am more than happy to wait a few years to see the difference between AA and UA’s strategy vs DL and WN’s… but history overwhelmingly says that AA and UA are following the same model that legacy airlines have followed for decades while DL is moving toward the capex model that WN has used – very prudent, limited expenditures only when the costs will result in clear revenue benefits. DL and WN believes they can achieve that with far smaller expenditures.
Let’s see how it plays out…
yes, Jim, there are people who are still trying to use yesterday's answers to solve today's problems... with predictable results.
