By David Koenig / Associated Press
Delta Air Lines has picked Europe’s Airbus over Boeing for a huge order of new jets.
Delta said Thursday that it will order 100 Airbus A321neo jets with a sticker price of $12.7 billion and take an option to buy another 100 jets, a deal that Chicago-based Boeing had hoped to land.
Financial terms of the order were not disclosed so it isn’t known how much Delta will actually pay Airbus. Airlines typically get huge discounts off the sticker price of new planes.
Atlanta-based Delta announced the order just before beginning its annual meeting with investors.
CEO Ed Bastian told investors that travel demand remains strong both on international and U.S. routes. He said Delta expects fourth-quarter revenue for every seat flown one mile — a measure of ticket demand and average fares — to rise about 4 percent from a year ago, up from Delta’s previous forecast of 2 to 4 percent.
But costs for fuel and labor are rising, too. Bastian said Delta’s fourth-quarter operating margin will be around 11 percent, at the low end of the company’s previous prediction.
In afternoon trading, shares of Delta Air Lines Inc. were up $1.58, or 2.9 percent, to $55.21. Despite the setback, Boeing Co.’s shares also rose, adding $2.39 to $294.23.
Delta’s selection of Airbus jets comes after Boeing challenged a smaller Delta order of planes from Canada’s Bombardier. Boeing charged that the sale price was artificially low and amounted to dumping. The U.S. Commerce Department sided with Boeing and proposed stiff duties on Bombardier jets.
Airbus CEO Tom Enders said the win strengthens a relationship with Delta that his company has built over many years. He said most of the planes would be assembled in Mobile, Alabama.
Boeing said it made a “strong but disciplined offer” to Delta.
“Delta remains a valued customer, and we’ll continue exploring ways to best meet their needs in the future,” Boeing spokesman Doug Alder said in an email.
The Airbus A321neo is a single-aisle, mid-range plane that competes with Boeing’s 737 Max. Delta said it will begin getting the 197-seat jets in early 2020 to replace smaller planes.
Boeing’s bid was hurt by the trade fight and a perception that the A321neo could be better than the comparably sized planes in Boeing’s Max lineup, said Richard Aboulafia, an analyst with aviation consulting firm Teal Group.
“Boeing had little chance here,” he said.
More than three-fourths of Delta’s planes are Boeing or McDonnell Douglas and include the planes most likely to be replaced by new Airbus jets. Delta’s 178 MD-80-series planes average 21 years in age.
Airlines have been ordering bigger planes to carry more passengers and earn more revenue without adding flights. That is especially important at busy East Coast airports where it can be hard to squeeze in more flights.
Delta also announced that it will get a large amount of maintenance and repair work for Pratt & Whitney engines used on Airbus A321neo and Bombardier C Series jets flown by Delta and other airlines. Delta said the deal will create new jobs in its maintenance business. It did not disclose financial terms.