Delta Firms up Orders for New Boeing Jets

Cox News Service

Delta Air Lines and aircraft maker Boeing Co. handed each other early Christmas presents, firming up orders on dozens of new jets. The move could help win the big creditor's backing of Delta's efforts to avoid a hostile takeover by US Airways.

The Atlanta airline said Thursday it has agreed to upgrade previous orders of five wide-body Boeing 777s to a longer-range version and to order 10 Boeing 737-700s.

In another move, Delta said it also reached agreements to take delivery of 38 Boeing 737-800s and to immediately sell them to two aircraft leasing companies, instead of adding them to Delta's fleet.

Industry experts said the moves probably will reinforce the ties between Delta and Boeing just as the bankrupt carrier is trying to fend off a hostile takeover bid by US Airways. "I would think Boeing is helping Delta out of bankruptcy," said Gueric Dechavanne, with BACK Aviation Solutions, an aircraft valuation firm in New Haven, Conn. "It's kind of, 'We'll help you today if you'll help us out tomorrow."'

US Airways announced an $8.7 billion bid on Nov. 15 to acquire Delta, and is trying to woo its bigger rival's creditors. Delta's management is expected to present its case for remaining an independent carrier to its board of directors and creditors next week.

Boeing sits on Delta's court-appointed committee of unsecured creditors. The longtime supplier of planes to Delta's fleet is one of the airline's largest creditors; it had almost $4 billion in claims tied to future aircraft orders when Delta filed bankruptcy 15 months ago.

"We've had a long-standing relationship with Boeing, and the addition of these aircraft to Delta's existing Boeing fleet allows the company to fulfill key elements of its long-term fleet plan," Delta's head of fleet planning, Mel Fauscett, said in a statement. "These new aircraft are also an important part of Delta's transformation, enabling Delta to fly customers to more international destinations in greater comfort."

Delta did not disclose terms of the agreements, which will be subject to approval by the bankruptcy court. A hearing has been scheduled for Dec. 20 in New York.

Paul Nisbet, president of investment research firm JSA Research in Newport, R.I., said Delta's firmed-up business will probably help nudge Boeing "on the side against merger." But he added that Boeing probably doesn't need much urging to back Delta, a longtime customer.

"US Air and America West have a lot of Airbus airplanes. I would think 1/8Boeing 3/8 would prefer to stay with Delta," he said.

Delta spokeswoman Gina Laughlin said the timing of the agreements "is tied to getting on the 1/8court 3/8 docket. ... These are all things we want to be resolved as part of our restructuring and plans to emerge from bankruptcy in the first half of 2007."

In the deals, outlined in a court filing late Wednesday, Boeing and Delta appear to be scratching each others' backs.

Delta gets to convert the 10 Boeing 737s it is buying to slightly smaller 124-seat versions, rather than the 150-seat versions it had signed options for.

Boeing now will have firm orders on its books rather than the options that pre-dated Delta's Chapter 11 filing. Delta could have sought to cancel the orders in bankruptcy court.

Delta, which has made its overseas expansion a linchpin of its restructuring, said the new planes will give it more flexibility to fly to smaller markets in Latin America, the Caribbean, and on longer domestic flights.

Dechavanne said each of those jets will cost Delta perhaps $7 million less than the previous orders. He said the Boeing 737-700s are worth about $40 million each, but that Delta probably negotiated a lower price.

Meanwhile, he said, Delta is probably selling the 38 other Boeing 737s at a profit, while re-affirming orders that Boeing had on the books before the Chapter 11 filing. The Boeing 737-800s are "one of the hottest aircraft in the market," Dechavanne said, worth about $47 million each.

"I think it's a way for 1/8Delta 3/8 to make a little money and put some cash on the books," he said.

Dechavanne said the five longer-range Boeing 777s Delta upgraded to are worth about $139 million each, about $12 million more than the shorter-range 777s Delta previously had on order.

Russell Grantham writes for The Atlanta Journal-Constitution. E-mail: rgrantham AT ajc.com.

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