December has been a rough month for American aerospace company Boeing. Shortly after it was announced that Canada would be canceling a planned order of F/A-18 Super Hornet fighters, another bit of bad news came from closer to home.
Delta Air Lines has announced it will be going with Europe’s Airbus over Boeing for a massive order of new commercial airliners. The deal, for 100 Airbus A321neo jets, will mean Boeing is missing out on a deal that could be worth more than $12 billion, at least based on the sticker price. And that’s just the first half of this one-two punch. Delta will also likely take the option of an additional 100 airliners in the near future.
Associated Press reported that Delta CEO Ed Bastian told investors travel demand is “strong” in both the US and international markets, and that this purchase better positions Delta to be competitive in both markets. This is vital for Delta, as fuel costs are still on the rise. They need more travel, and more profitable seats, in order to keep their margins.
Some are saying the Airbus deal is in retaliation for Boeing challenging Delta’s attempts to purchase some planes from Bombardier. That earlier sale was scuttled after Boeing claimed the sales price was “artificially low.” Since that claim, Canada stopped an order from Boeing as well.
If there’s a winner in all of this, it’s clearly Airbus, as the company’s CEO Tom Enders was all smiles recently, telling the press the deal “strengthens a relationship” with Delta his company has been working hard to build through the years. In an interesting twist on the whole deal, Enders affirmed that “most” of the planes in the order would actually be built in Mobile, Alabama, which is a win for American manufacturing, even as it’s a loss for a single American manufacturer.
Delta spokesman Doug Adler was faced with the task of putting a good spin on the news, telling the Associated Press, “Delta remains a valued customer, and we’ll continue exploring ways to best meet their needs in the future…”
That comment telegraphs the contention that all of this is just back and forth over the attempt to block Delta’s previous deal. If that’s the case, it could be “bygones are bygones” very soon. While both sides can talk about the future, the company that gets that deal for the next 100 jets will be a big indicator of where this is going, at least in the short term.