Did Delta get a 51% discount on its 737-900ER deal?

Delta-737-900ER-tail_560.jpgIntrepid blogger Dan Webb detailed a few big additions to Delta Air Lines’ SEC filing today, noting the inclusion of aircraft purchasing commitments for the 100 Boeing 737-900ERs the airline firmed up last week.

  • Delta now has “total aircraft purchase commitments of $6.8 billion, including $55 million for the six months ending December 31, 2011, $210 million in 2012, $540 million in 2013, $760 million in 2014, $770 million in 2015, $780 million in 2016 and $3.7 billion after 2016.”
  • For comparison’s sake, in its 10-Q Delta reported $2.6 billion in aircraft purchase commitments as of June 30. This number included $30 million in the second half of 2011, $70 million in 2012, and $2.5 billion from 2020 to 2022. Those figures “relate to 18 B-787-8 aircraft and 14 previously owned MD-90 aircraft.”

With a quarterly growth of $4.2 billion in commitments adding in the newly-purchased 100 737-900ERs at a list price of $85.8 million, back-of-the-napkin math shows a 51% discount on each airframe and engine combination. What the shared revenue split between CFM and Boeing is, we’ll never know, but for reference a pair of new CFM56-7B engines run at a list price $12 million.

Rendering Credit Boeing

5 Responses to Did Delta get a 51% discount on its 737-900ER deal?

  1. AS August 31, 2011 at 12:54 pm #

    How does the cancellation of options / rolling options factor into the math? I didn’t clearly understand the explanation on Dan Webb’s blog, but it sounded like the deal resulted in a reduction of 96 options (60+66 738 options replaced by 30 739 options).

    Also did Delta take any deliveries in the last couple of quarters that would have affected the committed backlog?

    Still a superb deal on the face of it.

  2. Peter August 31, 2011 at 2:17 pm #

    I’ve got to echo AS’s comments. Rarely is this kind of deal as straightforward as $X for X aircraft. There’s almost always other kinds of factors involved.

  3. synchro.mesh August 31, 2011 at 5:53 pm #

    I can just see the next set of headlines. Nonesense such as Boeing buying market share and what not. There has to be a better way for a journalist to make a living.

  4. B737man September 1, 2011 at 2:54 pm #

    Boeing really wants to keep the 737 production line running full steam before the 737MAX enters the market in 2017. Everyone wants to buy the NEO or the MAX now, unless the 320 or the 737NG is sold with a deep discount. So in the end, Boeing is willing to discount deeply in order to keep their production line running.

  5. keesje September 2, 2011 at 10:41 am #

    Agree with 737man. It’s a strategic choice. DL fully understands and got a reasonably good, low risk very usefull aircraft, quick & for a very good price. Compensating higher fuel costs for those aircraft.

    Airbus is not out of sight for Delta. I see the chances of them buying a sizeable NEO fleet in the next few yrs bigger then 50%. Specially if the A321 NEO furthers grows compared to the 739ER in payload-range.