As the Boeing 737 MAX crisis drags on, with impacts felt by airlines around the world, Delta Air Lines is flying high. The MAX free airline finds itself deriving some unanticipated benefits from the grounding, helping it to grow capacity in the first half of 2019.
US investment house, Cowen & Co issued an investor’s note on Monday 8th July saying Delta was stepping in to fill a capacity hole. This is as a result of its competitors continuing to cancel flights as a result of the 737 MAX grounding.
A report in Air Transport World quotes the investor’s note written by Helane Becker, a Cowen & Co analyst, as saying,
“Delta is benefiting from artificially low capacity growth and spillover demand from competitors impacted by the grounding of the MAX.”
Between them American Airlines, Southwest and United have 72 Boeing 737 MAX’s sitting idle on tarmacs. Up to 150 flights a day are being cancelled as a result. Delta has no MAX’s in its fleet.
Delta’s capacity growth in June 2019 was way above expectations. However, Cowen & Co notes that this uplift for Delta is only expected to be temporary. Delta’s share price closed yesterday at USD$59.38, up USD$0.48 on the day’s opening price.
Why it’s all going right for Delta
Delta is enjoying a run of good fortune right now. Although the deployment of its shiny new A330-900neos has been pushed back to later this year, it has a steady stream of new aircraft coming through, and is laying out its new A220’s on regional routes. The tempo of this delivery stream should pick up the pace later this year and into 2020.
Benefiting from public goodwill, solid reputation and capacity growth, Delta is perfectly positioned to benefit from the 737 MAX grounding – however unintentional this may be.
Delta’s good fortune comes at the expense of its competitors as the impact of the continuing 737 MAX grounding reverberates through the industry.
At other US airlines, the pain continues
American Airlines has 24 Boeing 737 MAX sitting idle. According to Marketwatch.com, the airline is cancelling roughly 115 flights a day. In late April 2019, American Airlines estimated the grounding would cost it as much as $350 million. As the grounding drags on and the costs mount, the airlines have become more cautious about releasing information about the financial impacts of the grounding.
United Airlines has 14 Boeing 737 MAX’s grounded. It is currently cancelling about 45 flights a day but this is expected to creep up to around 60 flights a day in August 2019. United is seeking compensation from Boeing.
Southwest is the largest operator of the 737 MAX in the world, and has 34 jets grounded. While it caters for a different type of customer to Delta’s target market, it is still cancelling around 150 flights a day. To manage expectations, it has pushed the MAX out of its schedule until 1st October 2019. Additionally, the grounding is temporarily halting its expansion plans, including its Hawaii services.
No-one is accusing Delta of deliberately taking advantage of its competitor’s misfortunes.
Rather, the airline has the good fortune of being in a sweet spot right now, and it is reaping the rewards. None of this would have been possible without the good reputation for reliability that Delta have already built themselves.
Simple Flying reached out to Delta for comment but had received no response by the time of publication.