How The Boeing 737 MAX Grounding Is Benefiting Delta Air Lines

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.

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Delta Air Lines is flying high as it adds capacity and soaks up excess passengers from the MAX grounding. Photo: Delta News Hub

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.”

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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.

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Delta’s A220s are becoming a familiar site around the airline’s regional airports. Photo: Delta News Hub

The airline enjoys being in the spotlight and is currently ranked as the best airline in the USA.

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.

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While Delta benefits from the MAX crisis, American Airlines is feeling the pain. Photo: Wikimedia Commons.

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.

Overall

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.

14 comments
  1. In addition to the fact that Delta DON’T have the 737 MAX, and DO have the A220, another positive point is that they DON’T have the (cramped) 787 🙂
    Moreover, they configure their 777s with a 3-3-3 seat configuration in economy.
    And they have LOTS of A330s: because of its 2-4-2 seating configuration, I think the A330 is the most comfortable widebody (after the A380, of course).

    Downside: they don’t yet have a dedicated premium economy cabin.
    Other downside: They’re still flying relatively large numbers of very jaded 767s.

  2. I mostly agree with Nigel except I would have said…(cramped and shoddily built) 787. Also the 767s were at least comfortable and reliable.

    What puzzles me about the 737 MAX saga is why airlines are not cancelling their orders for the craft and returning the ones they do have as “not fit for purpose” with full refunds and no cancellation penalties.

    1. Hi Norman. I too always liked 767s. They might have been fuel guzzling beasts but they were always comfortable to fly in

      1. I’m not against the 767 per se: in its day, it was a very nice plane.
        My problem is that, by today’s standards of noise and fuel consumption, it’s long past its time.
        Its overhead baggage bins are also woefully inadequate for today’s numbers of carry-ons, and I’ve experienced arguments on board due to lack of luggage space.
        What I’m basically saying is that it has served airlines well, but it’s now a dinosaur.

  3. For me Delta was already the best American carrier (Best service,best food, best entertainment, personal TVS & more space )between Europe & the US even before they avoided to order the 737 Max.

  4. Lemon laws should apply to aircraft. Boeing should have to buy back all the grounded aircraft since they are not “fit for use”.
    New flaws are being found faster than Boeing can attempt to fix many, many known flaws.

  5. I fly delta three times a month on their regional jets are old based out of Atlanta MD88/90 and the 717 but very reliable. They have also have 130 737-900NG for the short heavier flights. Their current order is all airbus thru 2023 are a220s,321-200,321neo,330neo and 350-900 totaling 261 new Airbus planes for Delta. The 757-200 will be phased out starting next year and replaced by the 321neo for the flights to central and northern parts of South America from Atlanta. Finally a new plane for me to fly on with Delta.

  6. I love the new a321’s delta has and the 757 use to be my favorite and can not wait on the 321neo’s to arrive next year. I don’t fly the widebodies much but 767-400 is a good plane for me and being a platinum member easier upgrades on these planes.

  7. Extend your lead Delta! Was it good fortune or sensible review of aircraft. Anyone in aircraft assessment would have to question the Max! The Boeing sell job (that clearly turns out to be lies) about the 737 Max must have been impressive.
    The other airlines that are “sticking by” Boeing and 737 Max is extraordinary. Those airlines are not thinking about their passengers and crew or the next 20 years of fleet management! Wait to when (or if) the 737 Max gets back in the air… social media is going to drown any attempt from Boeing to “prove” how safe their new (whoops I meant old and aerodynamically unstable) plane is.
    Love the buy back idea and start again – Boeing is a great plane maker time to switch from profits to pride in your product..

  8. Doesn’t bother me in the least. I’ll continue to fly my Cessna 182 to Newark and then take a shuttle to JFK to catch my European flight on a much superior airlines such as Lufthansa and Emirates.

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