Delta Airlines Analysis

August 11th, 2008

Today’s YouTalk entry is kindly supplied by my colleague, Colin Voss.

Delta, An Airline That Learned From Its Mistakes - Or Has It?

It can be stated without a doubt that Delta Air Lines has seen its fair share of media attention in recent years, be it their proposed merger with Northwest, being the first US operator of Boeing’s long haul wonder the 777-200LR, being involved the JFK winter delay chaos, or its second airline-within-an-airline attempt Song. Obviously, some news were good, others were bad, just the way things happen in the business world. And no doubt, Delta has had its share of mistakes that lead to those bad news. The question is, have the people at Delta learned from the mistakes and were they able to avoid making those same mistakes again?

That’s the question I want to answer with this article. But to keep things short (at least by my standards), I will only talk about the 4 points I consider the most important ones, because if I were to analyse every single point you’d probably still be reading this article next week.

-Not using planes to their full potential:

A still fairly recent example, the year is 1999, and Delta has finally gotten their first 2 777s. Prior to the 777 arriving, the MD-11 was Delta’s choice of high-capacity long haul plane, a decision that always haunted them in that the MD-11 never performed as well as MDD promised and all too often required fuel stops on Delta’s then-longest flight Atlanta-Tokyo. So now with the 777 Delta finally had a plane for that route that could operate without the slightest risk of facing fuel-related unscheduled stops, so logic would suggest those 777s be put on ATL-NRT asap after doing a few trial flights on ATL-MCO to get the pilots used to them. Alas, that was not to happen, as instead DL chose to use their 777s on comparatively short transatlantic routes like Atlanta-Paris/London. As a result, Delta’s 777 fleet had a relatively short average airtime per frame, and the MD-11 continued to fuel-stop on the Tokyo flight, until it was finally replaced years later.

Images courtesy of Delta Airlines /Boeing

Fast forward to the year 2008, and it looks like Delta has learned well from their mistake, as their 777s are now not only flying on Delta’s longest, and supposedly also highest-yielding, long haul flights, but we also see that the average block time of the 777 fleet has significantly increased, with the 777-200ER’s having an average block time of 18 hours per day and airframe, compared to the lacking 15 hours it used to be during the initial year of operations, owed mostly to an increase in the average segment length of 777 flights. Another example of Delta better using planes to their potential is the fact that they also send their 767-300ERs on missions that really stretch their legs, with some examples being JFK-Tel Aviv/Amman at 4934nm, and the primary example being ATL-Lagos at 5078nm, one of the longest 767 flights in the world. Prior to that, Delta’s longest 763 route was ATL-Moscow, and that route was a good 400nm shorter, clearly showing how Delta is literally stretching their planes. Consider also that ATL-SVO is now flown by the 767-400ER, which is now also being used to its full range potential. Not to be outdone, November will see the start of ATL-Mumbai, which will then be the world’s longest 777 flight, operated by the 777-200LR Worldliner.

Suffice to say, Delta has learned from their mistake in this case.

- Having a too diverse fleet:

At the turn of the millennium, Delta had seemingly every US-made plane in their fleet:

727-200’s, 737-200’s, 737-300’s with old cockpits, 737300’s with glass cockpits, 737-800’s, 757-200’s, a handful of ex-SQ 757’s, 767-200’s, their own 767-300ER’s, ex-Gulf Air 767-300ER’s, 767-400ER’s, 777ss, MD-11’s, MD-88s’ and MD-90’s, a total of  6 plane families (727, 737, 757, 767, 777, MD-11, MD-8X) with a total of 15 very varying subfleets, clearly anything but a symbiotic and efficient fleet.

In the following years, in part due to 9/11, Delta reduced their fleet big time and also simplified it, leading to a fleet of 737-800’s, 757’s, a handful of ex-SQ 757’s, their own 767-300ER’s, ex-Gulf Air 767-300ER’s, 767-400ER’s, 777’s, MD-88s’ and MD-90’s, down to 4 families (737, 757/767, 777, MD-8X) and 9 subfleets. Granted, the number of subfleets has recently grown back to 12, with the 777-200LR being added, in recent weeks the 737-700, as well as the ex-AA/TWA 757’s, though neither plane meant a new family for Deltas fleet, and save for the 777-200LR’s engines, pretty much everything is common between the new types and the planes already flying for Delta. And for those wondering, I won’t include Northwest’s fleet, because as long as the deal has not been officially cleared, it doesn’t make much sense talking about what could be.

So once again, Delta has learned from their mistake. Yes, things could still be better (like elimination the ex-SQ 757’s and ex-GF 767-300ER’s to simplify the fleet), but these days other factors decide which planes will go, mainly a combination of need for the capacity, and lease contracts being up for renewal. And being that the two aforementioned subfleets are all leased, further simplification might happen sooner than we think.

- Over-dependence on Regional Jets:

It seems over the last decade, the only thing Delta CEOs wanted to do was add RJs to do everything for them:

Replace props; Replace small mainline planes like the 732; Increase frequency in small markets; Serve every little backwoods city in the US, Canada and to the South, preferably from at least 2 hubs. This all lead to Delta having one big cluster of regional operators operating pretty much every RJ over the year from the Fairchild-Dornier 328Jet over the CRJ to the E-Jets, which resulted in over 500 RJs being operated for Delta at a time, a larger fleet than even Delta’s own mainline fleet.

Thankfully, finally, this year, mostly due to high fuel prices, Delta seems to have finally seen the light with regards to RJs.

Yes, it has already been some time since they realised that 70-seat RJs, and particularly those with a First Class cabin, not only provided better economics and better customer satisfaction than the dreaded 50-seaters, but it wasn’t until this year that people at Delta realised they needed to clean up their Delta Connection cluster and both reduce overall capacity as well as the number of operators. This has resulted in Delta ending their agreement with ExpressJet, dropping Mesa/Freedom Air, dropping Chautauqua’s 37-seat ERJ-135s, and replacing 50-seat CRJs with 70/76-seat CRJ-900s, as well as retire older CRJ-100s. These moves so far will reduce Delta’s RJ fleet by around 1/4, or roughly 130 planes, as well as reduce the number of operators down to 4 (ASA/Skywest, Chautauqua/Shuttle, Comair and Pinnacle). Needless to say this is made possible by Delta dropping countless point-to-point routes, especially low-yield routes out of Florida, and reducing frequencies on quite a few other routes.

Now, one might be tempted to say Delta has again learned from their mistakes, but that’s only partially true, as Delta still hasn’t learned their lesson about operating props. Their last large props, ASA’s ATR-72s are to be gone by year’s end, leaving less than a dozen EMB-120s at Skywest, who are also scheduled to be retired in the foreseeable future, and we have yet to see Delta order a replacement prop. Obviously, with fuel being the way it is, props have undeniable advantages over RJs on a lot of short sectors, but unfortunately, it seems Delta still has not realised that, and that’s one point they still need to be criticised for.

- Not knowing how to treat an LAX hub properly:

This point right here from the start I can say is one where Delta has not learned from their mistakes, and that in a good two decades.

After the takeover of Western, Delta had 2 hubs in the Western US, namely LAX and Salt Lake City. While SLC has remained a constant force in Delta’s network, though admittedly only really seeing major growth after the de-hubbing of the DFW hub, the LAX hub saw a few highs, and even more lows. Thanks to Western, the LAX hub had a large route network on mainline planes covering most of the US as well as many cities in Canada and especially Mexico, plus a sizable regional network operated by Skywest, providing ample of feed for WA’s mainline network. You had a decent hub in one of the world’s largest aviation markets, so what do you do with it.

Build it up?

That’s what you’d expect, but alas people at Delta thought differently, and instead of for example routing their ATL-NRT-SEL flight through LAX now, they kept it at their PDX ‚hub’ (another discussion-worthy point, no doubt), and also slowly but steadily started cutting routes from their LAX hub, most notably the Mexico flights, thus over the years basically eliminating all mainline flying save for a handful of destinations in ATL, CVG, JFK, SLC, DFW, MCO, HNL, OGG, and the sole remaining international flights to MEX and GDL. Things also weren’t helped when Skywest was dropped out of LAX as a feeder, because of their focus on operating as United Express out of LAX and SFO. Routes and flights fluctuated a bit over the years, as Delta seemingly did not know what to do with their LAX hub, at one point even moving their failed PDX-Asia flights to LAX for a short while before ultimately killing all West Coast-Asia flights.

Now flash-forward to 2006, and Deltas latest (but likely not last) attempt at building up LAX. Actually, the idea thought about then wasn’t so dumb, using planes that would normally RON at East Coast cities, and have them operate East Coast – LAX – East Coast round trips, with the latter flights as red-eyes, thus getting higher usage out of your fleet as well as growing your LAX network. Only problem was that there was true feed save for their lame code share on Eagle, to help fill those planes outside of L.A.’s O&D. Feed only came in the last year, when Delta tried another major expansion from LAX in the West as well as Mexico, relying solely, of all planes, on CRJs and later ERJs. And it’s probably an undeniable rumor that most of those flights were just launched to show LAWA during Delta’s CH11 restructuring that DL needed their entire Terminal and LAWA had no base to take the gate leases away from Delta.

Granted, with regards to keeping their gate leases, the expansion actually worked, but that didn’t keep Delta from once again cutting their LAX hub to a bare-bones operation, as facilitated by a combination of high fuel prices, wrong plane types, and overall not being able to efficiently compete with the other big carriers at LAX, DL has now cut pretty much their entire Mexican operation save for GDL, as well as most single-daily transcon routes, thereby sealing another failure for Delta at LAX. And while fuel prices no doubt were a major factor in this latest failure, it can’t be denied that DL once again failed to understand the nature of the L.A. market.

Like I said, it wouldn’t surprise me to see Delta give their LAX hub yet another try fairly soon, but it remains to be seen whether they’ll then be able to avoid repeating past mistakes.

So far, they have not learned from them in this case.

C.Voss

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