In accordance with its fleet renewal strategy,
Delta Airlines Inc.
) has once again favoured European aircraft manufacturer Airbus
over the latter's arch rival
The Boeing Co.
). This time the carrier has announced plans to purchase 15 new
jets from Airbus in a deal worth $1.65 billion.
The company has ordered 15 narrow bodied A-321 aircraft, with
deliveries scheduled 2018 onward. This fleet will replace some of
Delta's less efficient domestic aircraft.
The single isle A-321 will have 192 seats, including 20 First
Class seats and 23 extra-legroom seats. The aircraft will feature
CFM56 engines and will have in-flight entertainment like Wi-Fi
services, and live satellite TV and on-demand options.
This comes as the second order from Delta for Airbus jets within
a span of nine months, demonstrating the premier passenger
carrier's recent inclination toward the European vendor. In Sep
2013, Delta had ordered 10 A330-300 wide body jets and 30 narrow
body A321 aircraft from Airbus worth $5.6 billion, to be delivered
between 2015 and 2017.
Post the latest Airbus requisition, Delta will have 45 firm
orders for A-321 jets along with its existing 126 narrow-bodied
jets, which includes 57 A-319's and 69 A-320's. The first of the 45
A-321 jets is expected to arrive in early 2016. Notably, Delta has
the most diversified fleet among all the other U.S. carriers with
more than 750 aircraft manufactured by Airbus and Boeing.
The A-321, which is a stretched version of the well-accepted
A-320, is much in demand among carriers as it offers more seats
with a relatively small increase in fuel cost. This aircraft suits
the need of popular U.S. carriers like Delta which witnesses fast
seat fill-up on its domestic flights.
In an attempt to enhance its fleet structure, amenities,
products and technological base, Delta aims to invest $2.0-$2.5
billion annually, till 2018. The latest transaction is part of this
capital investment plan.
According to Delta, the new airplanes will help enhance customer
comfort in addition to boosting its shareholders' returns. We
believe the attractiveness of carriers toward these jets lies in
the extra revenue-generating opportunity that they offer against a
minimal rise in expenses. In our opinion, the latest addition of
aircraft from Airbus will allow Delta to improve its bottom line,
Delta currently sports a Zacks Rank #1 (Strong Buy). Other
well-placed stocks worth considering within this sector include
American Airlines Group Inc.
Southwest Airlines Co.
). Both the stocks currently carry the same rank as Delta.
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