Credit: Shutterstock photoIn accordance with its fleet renewal strategy, Delta Airlines Inc. ( DAL ) has once again favoured European aircraft manufacturer Airbus over the latter's arch rival The Boeing Co. ( BA ). 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, going forward.
Delta currently sports a Zacks Rank #1 (Strong Buy). Other well-placed stocks worth considering within this sector include American Airlines Group Inc. ( AAL ) and Southwest Airlines Co. ( LUV ). Both the stocks currently carry the same rank as Delta.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
