(Reuters) - U.S. carrier Delta Air Lines will watch the wave of orders for the latest Airbus and Boeing planes roll on by and wait for the jets to prove themselves before ordering any, its chief executive told Reuters on Wednesday.
The two airplane makers have orders for more than 3,000 of their narrow-bodied models, the Boeing 737 MAX and the Airbus A320neo, which boast fuel savings of about 15 percent. The new models are to be in service from the second half of the decade.
“We’d rather get toward the end of a production line because one, the airplane has probably been stretched, and stretched economics are always better than the original economics,” the airline’s Chief Executive Officer Richard Anderson told Reuters reporters and editors at Reuters New York headquarters.
Jumping in at the back of the line for a new model allows time for technical difficulties to be resolved, he said.
"Our ideal solution for buying airplanes is to compete Boeing against Airbus against used airplanes; compete GE (GE.N) against Pratt (UTX.N) and Rolls-Royce (RR.L) so that we always have multiple engine manufacturers and multiple airframe manufacturers at the table," Anderson said. (For a look at Delta's business performance, click link.reuters.com/tar38t)
In 2011, Delta ordered 100 Boeing 737-900ER models due to be delivered starting later this year, but it has not bought either the Boeing 737 MAX or the Airbus A320neo.
Rival U.S. airlines such as United Continental Holdings (UAL.N) and AMR Corp’s AAMRQ.PK American Airlines, which plans to merge with US Airways Group LCC.N this year and form the world’s biggest carrier, have already placed orders for the re-engineered jets that are due for delivery over the next few years.
Anderson said Delta’s deal with Boeing allowed it to convert the last 40 of the 737-900ER aircraft it has on order to the newer MAX model.
“We will evaluate it, but we would rather see some other people fly that engine around for a while,” Anderson said. CFM International, a joint venture of General Electric and France’s Safran (SAF.PA), makes engines for the 737 MAX.
As planemakers try to get airlines to buy their newest designs, prices on existing models become heavily discounted. Established models also tend to be more reliable as early technical problems are ironed out.
“We would rather see proven products that have cash-on-cash returns from the moment we take delivery,” Anderson said. “That is much more important.”
While manufacturers are playing up double-digit percentage reductions in fuel costs in their newest models, which are equipped with more fuel-efficient engines, Delta prefers to buy aircraft toward the end of their production cycle when prices are lower.
“The airplane salesmen always show you charts that have these big operating savings,” Anderson said. “But the charts never have the capital cost, so it is a little bit of a fallacy to analyze airplanes without the capital costs included.”
Airbus recently began talking up the lower ownership cost of its A330 wide-body jet as it defends the model against a proposed new stretched version of Boeing’s Dreamliner called the 787-10X. Airbus told a U.S. industry conference in March that the A330, whose sales have held up better than expected due in part to 787 delivery delays, could compete with the 787, implying price discounts to outweigh higher fuel consumption.
“We operate 33 A330s and were a launch customer in the U.S.,” Delta’s Anderson said. He added that should Boeing hope that its stretched 787 will take sales from the A330, “its prices have to come way down.”
Anderson declined to comment on reports that Delta is looking at placing orders for around 20 narrow-body jets and 20 current-generation, wide-body A330s or Boeing 777s.
Reporting by Karen Jacobs in Atlanta, additional reporting by Tim Hepher in Paris; Editing by Leslie Gevirtz