Delta brokers an Airbus deal that could net billions in revenue from P&W engine overhauls

Delta's landmark order for 100 Airbus A321neo jets puts the airline squarely in the Airbus camp, with the European airframer now representing nearly 70% of the airline's total aircraft on order. But over time, Delta stands to gain billions in revenue from the order after gaining a pledge from Pratt & Whitney that Delta TechOps will serve as a major engine overhauler for geared turbofan engines powering Airbus A320neo family aircraft and Bombardier CSeries jets.

In a closely watched race, Airbus has emerged as the victor in a key narrowbody replacement for Delta. The 100 A321neo jets featuring 197-seats will replace older Arbus A320s, Boeing 757s and MD-88 aircraft.

Delta boasts the A321neos are 40% more fuel efficient than its MD-88s, and offer 40 to 50 more seats than the aircraft they're replacing. Now that Delta has settled on Airbus, the European airframer represents 68.9% of Delta's aircraft on order, up from 56.3% in mid-Oct-2017.

Company CEO Ed Bastian recently remarked Delta secured "an incredibly good deal" from its partners at Airbus and Pratt & Whitney. Geared turbofan engines manufactured by Pratt & Whitney are powering both the Airbus A321neos and the 75 Bombardier CSeries jets Delta ordered in 2016.

Mr Bastian remarked a powerful factor in Delta's decision to settle on the Airbus A321neo was Pratt & Whitney committing to designate Delta TechOps as a main engine overhaul shop for the geared turbofan powering Airbus next generation narrowbody jets and the Bombardier CSeries family.

Pratt & Whitney has guaranteed Delta repair work on roughly 5,000 geared turbofan engines during the next 25 years, which Mr Bastian believes will create billions in revenue for the company.

Using a baseline cost of USD3 million for an engine removal, Mr Bastian concluded the 5,000 engines Delta aims to overhaul could generate USD15 billion in revenue. However, he cautioned revenue from the overhauls "won't come into our numbers for the first couple of years, but will certainly ramp up into the 2020s, and then every year, it continues to get higher and grow larger".

Delta TechOps will be the main engine overhaul shop across the Americas for the geared turbofan, and Mr Bastian stressed that was "one of the big differentiators in making the aircraft [Airbus A321neo] decision".