An ongoing international trade dispute is forcing Delta to alter its fleet plans, as the airline is forced to delay the retirement of some of its older gas guzzling MD-88s and MD-90s. Executive management announced on Thursday’s earnings call that the older fleet is going to be in use until the controversy surrounding the delivery of the C-Series is resolved.
The C-Series deliveries are delayed because Boeing accused the planes’ manufacturer, Bombardier, of being unfairly subsidized by the Canadian government. Boeing disputed Delta’s plan to buy 75 C-Series jets at ‘absurdly low’ prices. The pending resolution includes the possibility of huge tariffs being imposed on Delta for its C-Series imports.
Whether or not the tariffs actually materialize is still up in the air. In the interim, Delta is losing revenue. CFO Paul Jacobson said Delta expects its maintenance costs to be “a little bit higher than traditional first quarters.”
No resolution in sight for trade dispute
Late last year, the trade dispute grew even more complicated after Airbus swooped in and acquired the majority stake in Bombardier, moving part of its manufacturing to Alabama. This means the C-Series would be assembled in America and therefore might not subject to the ginormous tariffs.
Delta CEO Ed Bastian confirmed to investors and reporters Thursday, “Yes, we do know that we will not be taking the C-Series according to the current schedule, which would be taking delivery this spring.” Bastian said the current fleet will remain in service, “and to that end we have to invest in maintaining some aircraft, particularly MD-88s to keep them around a little bit longer than we were otherwise anticipating.” Mr. Bastian said most of the MD-88s should be retired by the year 2020 but the plan is more back end loaded than originally planned.
Flying the older planes will not only run up maintenance costs for the airline, it will also nix any projected fuel savings that had been anticipated when the smaller, fuel-efficient C-Series jets were to be put into service.
Very few other viable options besides keeping the Mad Dogs
Delta’s move to delay the MD-88 and MD-90 retirements comes as no surprise but one could argue that they could have used more regional aircraft or accelerated the delivery of other aircraft to make up for the delay. Unfortunately though, the challenges with regional flying (like the ongoing pilot shortage across both the military and for regional operators) means that extending the life of the Mad Dogs is a more viable option. Delta is aiming for a target of $100 million in fuel savings this year and is expected to take delivery of 60 additional fuel-efficient planes of different types.