The coronavirus lockdown has put a multitude of airlines in tough spots. Several steps undertaken by global carriers currently would have come as a shock a year ago! In an unexpected turn of events, the Atlanta-based carrier, Delta Airlines has stated that it has plans to retire all Boeing 777 aircraft in its fleet. The eighteen 777s in Delta’s fleet will end service by end of 2020 as a result of the substantial drop in commercial travel demand amidst the ongoing pandemic.
Delta Airlines stated in a report:
‘This retirement will accelerate the airline’s strategy to simplify and modernise its fleet, while continuing to operate newer, more cost-efficient aircraft.’
More details on the exact timing of the exit of these jets shall be disclosed at a later date, according to the airline. Delta was one of first customers to operate the Boeing 777, back in the 1990s, and them exiting this programme will come as a shock to Boeing too. Delta shall replace these 777s by the Airbus A330s and sophisticated A350-900s. This means that Boeing loses out on the chucks of revenue that were previously generated in maintainenace, modifications and training (cabin crew and maintenance trainings) required for these aircraft. In addition to the 777s, Delta shall also bid adieu to the ageing single-aisle MD-88 and MD-90 in mid June.
In a statement, Delta’s Chief Operating Officer, Gil West stated:
‘We’re making strategic, cost-effective changes to our fleet to respond to the impact of the COVID-19 pandemic while also ensuring Delta is well-positioned for the recovery on the backside of the crisis.’
According to the airline, these moves would better align Delta’s network to cope with the current lower passenger demand and streamline and modernise their fleet, alongside saving substantial costs. This move shall result in non-cash impairment charges of $1.4bn to $1.7bn in the second quarter, before taxes. Quite recently, another USA based carrier, Southwest Airlines, also took a similar decision to sell and lease back twenty Boeing 737 aircraft, to cope to the current business demands.
As of now, more than 650 Delta’s mainline and regional aircraft are grounded. However, the airline has said it has managed to halve its daily cash burn to about $50mn in the month of May 2020, as planned, by reducing flights and other related expenses. The Chief Executive of Delta, Ed Bastian stated in a memo:
‘Our principal financial goal for 2020 is to reduce our cash burn to zero by the end of the year, which will mean, for the next two to three years, a smaller network, fleet and operation (shall have to be implemented) in response to substantially reduced customer demand.’
What do you think about this move by Delta? Do you think retiring the ageing 777s will help Delta to sustain in these tough times? Let us know in the comments!
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