Delta Plans to Lease Used 757s for Hawaii, Europe Trips

Delta signed a letter of intent with International Lease Finance Corp. to lease the 10 used Boeing 757s.


In its first addition of big jets since 9/11, Delta Air Lines plans to lease 10 extended-range planes that could fly to Hawaii or some spots in Europe.

Delta signed a letter of intent with International Lease Finance Corp. to lease the 10 used Boeing 757s for more than seven years starting in 2007, the carrier said in a court filing. Deliveries would begin next July.

Delta said it hopes to sign a final rental agreement, which would require the U.S. Bankruptcy Court's approval, by Aug. 4. A hearing is set July 26.

Delta didn't say how much it will pay ILFC. The unit of insurer American International Group is one of the world's largest aircraft leasing firms.

Delta's move comes as big network carriers show their best financial results in years, despite still-high jet fuel prices. Fares have also risen amid continued strong demand and capacity cuts.

In the latest such fare increase, discount carrier AirTran Airways boosted short-notice and business-class fares $5 each way on Wednesday. Delta and most other carriers matched the price increase on routes where they compete.

Industry analysts look for most big carriers to show profits when they begin reporting second-quarter results next week.

Calyon Securities analyst Ray Neidl estimates U.S. airlines will report an aggregate $1.2 billion profit in the quarter and could remain profitable through the rest of the year, even though traffic drops in the fall and winter. He projects full-year industry net income at about $750 million --- the first profitable year since 2000.

Big network carriers "are in a better position than the low-cost carriers to take advantage of current market conditions" because of their renewed ability to control fare pricing and tighter controls on capacity, Neidl said in a report this week.

Network carriers could also get some relief because Southwest Airlines and other discount carriers will need to raise fares as fuel contracts that locked in lower fuel costs expire, Bear Stearns analyst David Strine said in a report Wednesday. Discounters were better able than big carriers to negotiate such deals because of their better financial situations in recent years.

Delta, which filed for Chapter 11 last September, has cut domestic capacity about 20 percent while shifting jets to more lucrative international routes. The move to rent more long-range jets fuels that strategy.

"These planes will give Delta a lot of options to continue to expand its footprint," said Delta spokeswoman Gina Laughlin. She said the jets have the range to fly transcontinental routes in the United States as well long-haul flights such as Atlanta to Hawaii or the Caribbean or New York to Ireland.

The added jets could also free up bigger, longer-range Boeing 767s to fly overseas. Delta is now using those planes on longer domestic routes, such as flights to Hawaii. Delta still has 16 of the Boeing 767s flying domestic routes.

The carrier, which hopes to emerge from bankruptcy next year, has not said how many more of those aircraft it plans to shift to international flying as part of its reworking of its route network. So far this year, Delta has added 13 new trans-Atlantic routes using 11 wide-body Boeing 767s that previously flew domestic routes.

The single-aisle 757 has usually been used on mid-length domestic runs but is capable of international flying in the extended-range version.



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