Delta mulls $2.3bn plane purchase for regional fleet

Bloomberg

Delta Air Lines Inc. is studying a purchase of roomier regional jets with a list value of as much as $2.3 billion — provided the company can get the pilots’ union to accept an overhaul of the small-plane fleet.
The Atlanta-based carrier told the Air Line Pilots Association it wants the option of adding as many as 50 more planes in the 70- to 76-seat range, according to a union memo sent to pilots on Sept. 10. Those aircraft, which can accommodate coach and first-class cabins, are more fuel-efficient and profitable than the all-economy 50-seaters now flying many short hops.
Delta also told the union it may eliminate the smaller planes without giving a timeline, according to the memo, which was obtained by Bloomberg News. The potential cost of buying larger regional jets is based on list prices for aircraft in the 70-seat range made by Embraer SA and Bombardier Inc., before discounts that are customary for large orders.
Pilots’ acceptance of the planes is crucial, because the current labor contract gives the union a say over which aircraft can be flown by Delta’s lower-cost commuter partners. Delta is among the U.S. carriers cutting back on cramped 50-seaters in favor of more-efficient regional models.
The union has objected to any additional 70- or 76-seat jets being flown by Delta’s affiliate airlines, ALPA Chairman John Malone said. A spokesman for Delta declined to comment.

Adding Luxury
U.S. airlines have been switching to larger planes and cutting their use of 50-seat jets, where passengers have complained about small cabins
and all-coach seating limits potential revenue. Delta had 153 of the aircraft as of July, compared with 309
three years ago, according to regulatory filings.
While they cut the smaller models, airlines are adding some luxury to their larger 70- and 76-seat aircraft to resemble longer-haul planes more closely. In March, Delta announced an 18-month plan to spruce up its two-class regional jets by adding leather seats and in-seat power to first-class cabins and enhanced economy areas, as well as installing new carpet and overhead bins throughout the plane.
The 50-seat jets are flown by Delta’s regional affiliate airlines under the Delta Connection brand. Any new 76-seat aircraft would also be flown by the affiliates. So-called “scope clauses” in Delta pilots’
union contract spell out rules on which aircraft can be flown by the affiliate airlines.
Pilots for major airlines generally object to the practice of outsourcing any flights to the regional carriers and prefer that they be given all flights, said Louis Smith, president of consulting firm Future & Active Pilot Advisors. A looming shortage of people qualified to fly commercially may give pilots’ unions more clout, he said.
“With the bargaining power of mainline pilot unions increasing, I don’t foresee any pilot group relaxing any of the rules related to scope clauses,” Smith said.
In the long term, Delta probably will bring more flying in-house and cut down on the use of regional carriers, said Michael Boyd, president of aviation consultant Boyd Group International. Pay and costs are rising among the smaller airlines, making them less attractive, he said.