Monday, August 14, 2017

Delta Memo Signals Plan for New Bombardier Jet in Los Angeles, New York

(Bloomberg) -- Delta Air Lines Inc. is eyeing New York and Los Angeles as the main bases for Bombardier Inc.’s new jetliner next year, offering a glimpse of how carriers can add service economically with the midsize aircraft.

Dallas is also likely to get a lot of C Series flights, Delta said in an internal memo to pilots, a copy of which was reviewed by Bloomberg News. That sets up a test of the carrier’s ability to use the single-aisle aircraft to attract customers in the backyard of American Airlines Group Inc. and Southwest Airlines Co. 

Delta is the first major U.S. carrier to buy the C Series, a midrange aircraft that offers roomier interiors than regional jets while typically carrying fewer passengers than a plane from the Boeing Co. 737 or Airbus SE A320 families. The Bombardier aircraft, which the Montreal-based company has spent at least $6 billion to develop, should enable airlines to offer comfy rides to midsize cities without flooding the market with too many seats.

“From the standpoint of operating costs, from the standpoint of ownership costs, it’s an ideal aircraft for these not-quite-mainline markets,” said Robert Mann, an aviation consultant and former airline executive. “If it performs as advertised, reliably, it’s going to be a real game-changer.”

Morgan Durrant, a spokesman for Delta, declined to comment on the memo or how the company will use the C Series. The aircraft is scheduled to enter service for the Atlanta-based airline in the second quarter of 2018, according to the Aug. 7 notice to pilots, which described preliminary plans for the planes.

Boeing Complaint

Delta ordered at least 75 of the CS100 models last year in a deal valued at $5.6 billion, before the discounts that are customary for large aircraft purchases. Ordering the C Series was a bit of an anomaly for Delta under former Chief Executive Officer Richard Anderson, who had historically preferred more tested airplanes over new models. He handed over the reins as CEO to Ed Bastian days after the order was announced.

The purchase threw a lifeline to Bombardier after the C Series program came in two and a half years late and more than $2 billion over budget. But the transaction also prompted Boeing to file a trade complaint with the U.S. government, accusing Bombardier of selling Delta the planes at “absurdly low” prices while benefiting from unfair Canadian government subsidies and calling for tariffs. Bombardier has denied the allegations.

Air Baltic Corp., which began flying CS300 planes in December, has seen a 21 percent improvement in fuel economy compared with the Boeing 737-300s that the model is replacing, Chief Executive Officer Martin Gauss has said. Bombardier had promised a 19 percent boost. Passenger feedback has focused on lower noise levels, a brighter interior and bigger spaces for stowing baggage, Gauss added.

Deutsche Lufthansa AG’s Swiss unit, which last year became the first operator of the CS100, has also praised the jet’s performance.

Regional-Jet Replacement

Delta will place the new CS100 planes on popular routes now served by the airline’s largest 76-seat regional jets, which will free up those planes to replace 50-seat aircraft around Delta’s system, President Glen Hauenstein said last month. He said New York would get the first CS100, without providing additional details. The plane has 108 seats in a standard dual-class configuration, according to Bombardier.

In Dallas, Delta may see a chance to poach some business customers from hometown carriers American and Southwest, potentially taking a bite out of their profit margins, said aviation consultant George Hamlin.

“Southwest is very much a thorn in Delta’s side in its home market in Atlanta,” Hamlin said. “The airline business is about margins, so if you can pry a modest amount of business from your competitor, the margin in that market may become problematic for the incumbent.”

Original article ➤ https://www.bloombergquint.com

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