Delta to Shrink Its Fleet of Small Jets, Significantly Improve Customer Experience with New Pilot Agreement

This week, Delta accomplished something incredibly rare… it came to a new tentative agreement with its pilots 7 months BEFORE the contract was amendable. How the heck did that happen? Both sides wanted something and there was time pressure for it come together. If the rank and file approve, Delta pilots will get big raises, but most importantly for travelers, the airline will shift to bigger jets with better passenger amenities.

Delta Rare Pilots Agreement

Union contracts in the airline industry are different from most others in that they never expire. Instead, at a certain point they become amendable. This is supposed to avoid disruption in service, but in reality, it’s just an awful process that draws out contracts negotiations over several years. It’s only when the stars align that things get done in a timely manner. But a timely manner would be soon after the contract is amendable, not the 6 months beforehand that we see here. So what’s the story?

There was a unique opportunity on the table for Delta to get a hold of AirTran’s fleet of 717s that Southwest has decided it no longer wants as part of its acquisition. But for Delta to get those airplanes, it had to get the pilots to agree to fly them for a rate that would make this move a smart idea. So there was some urgency for Delta to come to an agreement sooner rather than later to make this work out. Sure enough, the pilots were interested and the deal came together. Let’s talk about what this means for everyone.

Delta Pilots Fly the 717
If this is ratified, Delta will take the 88 717s in the AirTran fleet today. I don’t know the terms, but you know that they’re getting a smoking deal on these aircraft. The Delta pilots will fly the 717s at the same rate they’re paid to fly the DC-9s today. In the last quarterly report, Delta still had 21 DC-9-50 aircraft in the fleet, but those are on their way out to be retired soon. The 717s, which are just a bit shorter, will take over for those DC-9-50s with 110 seats split between First, Economy Comfort, and coach.

50-Seat Regional Jets Slashed by 65 Percent
But that’s not a one for one replacement; there are still an extra 67 airplanes if we do the math. Delta says it wants to keep capacity flat, so what else will happen? The airline will slash and burn the 50 seat regionals. Here’s how Delta lines up with 50 seaters as of the last quarter:

Operator CRJ ERJ Total

Chautauqua 26 26

Comair 30 30

ExpressJet 93 93

Pinnacle 141 141

SkyWest 63 63

TOTAL 327 26 353

That’s 353 of those 50-seaters buzzing around. And you know what the new contract would allow? No more than 125.

Holy cow, that’s a massive decrease. Delta is happy about this because with oil where it is, those 50-seaters are completely uneconomical. The pilots are happy because they get rid of a ton of outsourcing. But wait, we’re still out of balance. Let’s do some math. The DC-9s have 120 passengers, so multiplied by 21 airplanes and you have 2,520 seats. The 717s have 110 seats, so multiplied by 88 airplanes and that adds 9,680 seats. The RJs have 50 seats, so multiply that by 228 airplanes that are going away and you have 11,400. So right now, we’re removing 13,920 seats and adding back only 9,680. What about the rest?

70 More Big Regional Jets
It’s the bigger regional jets that balance this out. At last check, Delta had contracted for 102 aircraft in the 65 to 70 seat range. Those are a mix of CRJ-700s and Embraer 170s. In addition, Delta had contracted for 153 of the 76-seat jets, which are a mix of CRJ-900s and Embraer 175s. As part of this deal, the pilots will allow them to contract for up to 70 more of those 76-seat jets as long as Delta adds new mainline aircraft at a rate of 1.25 to 1. It’s pretty convenient that 1.25 times 70 is … 88 (if we round up), the number of 717s that the airline would acquire.

The Final Tally = Better Customer Experience
That means Delta adds another 5,320 seats, or about a total of 1,000 more seats than it will remove from the fleet. In the end, Delta gets rid of 228 money-losing 50-seaters and the terrible, cramped, single class experience that comes with them. It gains 158 bigger jets with First Class, wifi, and just a bigger more comfortable cabin. This will give Delta a more consistent offering for customers, and it’s going to come at a pretty nice price as well. I’m sure Delta is getting a great deal on the 717s, and all Southwest has to do is push them to the other side of the Atlanta airport.

The Losers
That’s great news for both sides. Who loses? Small cities may potentially lose out. The lucky ones will see fewer flights on bigger airplanes. The unlucky might lose out, but hopefully those 125 50-seaters that remain will be able to keep service to most of those cities, if not all. The other losers here are some of the regionals. I say “some” because some stand to gain 76-seat flying while others will lose. The biggest loser in my opinion is likely to be Delta’s wholly-owned subsidiary Comair. The airline has been shrinking for years, and now it will likely lose half its fleet. (It is the only operator of the older CRJ-100 so those are most likely going away.) This could be the end of that airline entirely, with the remaining big airplanes merged into Pinnacle?

The Rest
So is that everything here? Not quite. The pilots are also getting big pay raises out of this. Over the three-year term, rates will increase by 20 percent, sometime more depending upon the aircraft. Is Delta insane? How the heck is going to pay for that?

Well, buried in the contract somewhere are productivity gains. I don’t know the details on exactly what Delta gets, because those rules are pretty tough to get through. But Delta is going to get better production out of its pilots, and that will help to offset the hourly rate increase. Another offset is a reduction in profit-sharing. As we’ve seen many times before, variable compensation starts to shrink as unions fight for more in base pay.

Wrap Up
In the end, I like this deal as a passenger because the customer experience will dramatically improve. And I like this as someone who watches the industry as well. While I start to hyperventilate when I see such big pay increases, Delta is really getting a lot out of this deal in return. It helps when both sides have goals that align and are motivated to strike a deal. It sure paints a stark contrast to what’s been happening over at United lately. Now, we just have to wait to see if the pilots vote to take it or not.

[If you’d like to read the entire mind-numbing 400+ pages of the agreement, I’ve got an updated version attachedit right here thanks to Holly Hegeman over at PlaneBusiness.]


67 Responses to Delta to Shrink Its Fleet of Small Jets, Significantly Improve Customer Experience with New Pilot Agreement

  1. drg says:

    What this agreement would seem to preclude is the introduction of turboprops as a replacement for RJs, ala United, Alaska and Air Canada.

    • CF says:

      drg – As was mentioned, I don’t believe this says no to big props, but those would likely come at the expense of jets. I could be wrong on that but the details are somewhere in the link at the bottom of the post.

  2. Carl S says:

    That’s a large chunk of the “future” Southwest fleet. Any Idea if they are going to try and offset it with more 737s? I know they pushed back the delivery of some, didn’t know if this deal will change that.

    • Quest says:

      Gary Kelly said that if they could not get rid of the 717s that Southwest would retire some of the 737 Classics to keep the fleet flat. If they were able to move the 717s, which looks it will happen, they would keep those Classics longer.

    • Quest says:

      Gary Kelly said that if Southwest was unable to move the 717s, they would retire some of the 737 Classics to keep the fleet number flat. If they are able to move the 717s, which looks it will happen, they will keep the Classics longer.

    • CF says:

      Carl S – They say they want to keep capacity flat but they just deferred a bunch of new deliveries of 737s. So I’m honestly not quite sure how they’re going to pull this one off. Do they really have enough classics that were going to be retired over the next few years that they could keep in the fleet?

      • Carl S says:

        Yea, that’s where I’m at. Plus given that WN (Big Picture) is only getting ATL and a few 737s… is it starting to look like this was a bit of a bad idea?

        • CF says:

          I’m with you, Carl. I was hoping that Southwest would use this as an opportunity to figure out how to serve small cities and grow the potential network. Instead, Southwest is telling AirTran it knows exactly what it’s doing and is just keeping the pieces that fit into the old way of doing business. Oh, and I guess it’s using AirTran as a springboard to international markets, but if it got its act together with its reservation system, it could have done that on its own easily.

  3. Rohit Rao says:

    Fantastic graphic Cranky! One of the best I’ve seen you put out in a while.

  4. BrianKal says:

    Thank you Cranky, makes this news make sense for all, love the blog

  5. Jon says:

    Glad that the 717s will still have a home here in Atlanta.

    Ironic that Delta will take the remnants of AirTran, as it’s roots trace back to Delta’s old DC-9 fleet in the 90s.

    …and it seems to be a shrewd business move, too. Sharp mangement there in Hapeville.

  6. SEAN says:

    Curious – how will this effect hub opperations in MEM, CVG & MSP if at all? After all, the former pair have been shrinking for years & the latter is hanging around based on the merger agreement with Northwest.

    Ironic that those 717’s are just being shifted across ATL & yet boeing hasn’t produced one in quite some time.

    • Hunter says:

      Not sure I get the irony about ATL and Boeing production of 717? Line production ended (I believe) in 2006 with the last aircraft delivered to FL (incidentally they took the first delivery in 1999, as well).

    • CF says:

      SEAN – I can see this having a couple of different impacts on the small hubs. On one hand, there are fewer 50 seaters to serve smaller markets, so that could hurt the chances of retaining service. On the other hand, there might be some markets that could use a 76 seater and Delta simply doesn’t have enough on hand right now. So that could help them to upgauge certain flights as well.

    • Fred says:

      My guess would be that things have already settled down and won’t change – CVG and MEM have both seen large cuts, and the remaining 50 seat RJs will stay there (and a few larger ones). MSP will probably get more 717s (or MD88, MD90s) and some larger RJs, as it is in more of a ‘unique’ location than CVG and MEM, where the cities that are served are already served by DTW, ATL and New York.

      Also, do 717s have the range for MSP-west coast? That could add some flexibility if so.

      • CF says:

        Fred – The 717 should have a 2,000 mile range but that doesn’t mean it can practically do it. Still, there should be some good options from MSP.

  7. I bet when DL gets those 717’s they will have the faster paint jobs ever done on 88 planes. People will just think they are Southwest/AirTran flights so DL can’t have that so will speed up the paint process.

  8. Great deal! This is what SHOULD HAVE BEEN HAPPENING over the past 5-10 years throughout the US airline industry, which is to say replacing the nonsense of having 10 flights per day on 40-50 seat aircraft with 5-6 flights per day on larger aircraft.

    The effect of DL adding 1,000 seats while eliminating 70 planes is as follows: average seats per aircraft from ATL will increase sharply, total seats available increases slightly and total departures will decrease, perhaps significantly. CF can do this math far better than but, if most of these additions/deletions pertain to ATL, is it too much to expect that DL’s 1,000+ ATL daily departures can be lowered by 70… or 100… or even 150? This would be a SIGNIFICANT aid to ATL hub ops while not impacting much of the service to the spokes.

    In fact, it will rationalize service to the spokes. Classic example is ATL-TLH. Current state is 10 daily departures, half of which are on 50 seat CRJs. Since there will be far fewer 50 seaters in the system, DL can redeploy these to the smallest of spokes and replace these 5 CRJs with 3 717s. Even if the other 5 departures are unchanged (2 CRJ700s, 1 CRJ900, 1 MD88 and 1 A319), 80 new seats are added to the current 981 (increase of 8%) while reducing departures by 2 (decrease of 20%).

    Lather, rinse, repeat this a few dozen times and DL will end up with a much more logical mix of seats and departures to its ATL spokes while reducing daily departures by 10% (or even more) which could work wonders for ops when summer thunderstorm season hits.

    Let’s see… common sense, airline industry, a win/win union contract 6 months ratified early. Hmmmm, I must be missing something!

    • Hey Brett, sorry to bug you but do you have any thoughts on how this might affect totals departures and ops, specifically in ATL? Am I crazy or will there really have a trickle down effect to reduce departures and (therefore) help ops?

      • CF says:

        Bill – I think you’re right that it should result in fewer departures, but most of the departures that are culled may be in off hours anyway.

  9. Jason H says:

    This is so Delta. They already fly or have recently flown just about every passenger airframe made, but they were missing the 717 to complete the near sweep of Boeing products. Now they just need to get a couple used A340s and A300s and I think they would be the poster child for the “mongrel fleet.”

    Seriously though, I love this move. While the DC-9 is a very robust and capable airframe it is getting a bit long in the tooth. I can’t imagine that spare parts are all that easy to find for some areas of the plane and I recently learned that some DC9-30 cockpit parts are not even compatible with a DC9-50! The 717 will modernize that segment of the fleet and retire the DC9 from the active US passenger fleets. That this is also killing off a bunch of the 50-seaters is only an added bonus.

    I do second the observation of @drg up top. This seems to prevent Delta from contracting with Horizon to deploy the Q400 on some routes or another regional to deploy the potential new 90-seat offering from Saab.

    I also wonder if Delta couldn’t do some milk-run style flights to help correct for the increase in aircraft sizes. They did that with the Saab 340 in upper Michigan and I would think it would be possible with the 717 as well.

  10. This isn’t done yet. The contract hasn’t been ratified. But I hope it is. It looks like a win-win for both sides.

    To me, this is the wave of the future. It has to be if airlines are going to survive in a higher fuel price environment.

    The regional airline industry is beginning the process the legacies are ending (with the possible (likely?) merger of US Airways and American. There are simply too many regional carriers and 50 seat regional jets.

    If the stories of an upcoming pilot shortage are accurate, the overall reduction of frames is one solution to that problem.

    The service to smaller cities is going to be “rationalized” too. It’s simply not sustainable in its current form. With the EAS subsidies under fire (justifiably in many cases), and the reduction of aircraft, there’s going to be some consolidation in that space. You may see more airports like CWA that serves not only Wausau, but Stevens Point, Wisconsin Rapids and Marshfield, Wisconsin (all or which are small cities of roughly 30-60,000 residents). In many areas, there would be four separate airports.

    All-in-all, this is progress.

  11. Rlj says:

    Interesting to see the possibility of what goes around, comes around. It seems like it wasn’t that long ago that regionals were running away from their turboprops and into the arms of the CRJ 100s & 200s to improve air service and the customer experience. Now, the reality and possibility of them returning to the props in the form of the Q400s and new Saabs on smaller routes.

  12. JM says:

    Delta founder and good Douglas Aircraft customer C.E. Woolman would be happy.

    Long live the planes from Long Beach (and Santa Monica before that)!

    JM

  13. Arcanum says:

    “Delta gets rid of 228 money-losing 50-seaters and the terrible, cramped, single class experience that comes with them”

    I believe the CRJ-700 and CRJ-900 are just stretched versions of the base CRJ-100 model with a similar cabin cross-section, meaning the same cramped experience in Y but for more passengers.

    Of course, the lucky few getting free domestic upgrades to J will be happy with the larger planes.

    • Mike says:

      new 700/900s currently produced are actually “Next Generation” – its not groundbreaking but they did lower cabin floor a bit so should be more spacious and windows at better height.
      the 200 was initially included in the NG makeover but never happened.

    • Phil says:

      The 700s and 900s are definitely roomier than the 100 in coach. Not necessarily super wide, but definitely roomier. In fact, the 700 and 900 are more comfortable than the MD, as there is more legroom and the seats are slightly wider.

    • CF says:

      Arcanum – As Mike mentioned, CRJ-700 and 900 aircraft have a couple of things different. They are supposed to be a bit wider with a slightly lower floor. The biggest difference for me is that the windows feel much closer to eye level so you aren’t hunched over trying to loo out. Still, those are definitely not as nice. Delta, however, hasn’t said it would go with those airplanes. It could do more of the Embraer 175s (of which is has options on 36) and that’s a much nicer cabin.

      • Arcanum says:

        Perhaps the lowered floor makes it seem more spacious, although I can’t say I’ve noticed a difference on my (unfortunately frequent) Air Canada Express flights. FWIW, DL’s seat width is 17.5″ on all CRJ variants according to SeatGuru.

        As much as I love my home and native land, I also prefer the Embraers over anything from Bombardier. I would call the CRJ Canada’s most shameful export if it weren’t for Justin Bieber.

  14. Cranky, Great Article! The thing I find interesting is not how many of the 50 seaters are leaving, but the 125 that are staying. Didn’t Delta make an agreement with Pinnacle to fly the 50 seat CRJ’s until 2022. As I recall, Delta said up to 150 of those puppies, with the flexibilty to adjust the numbers. Delta did this to help Pinnacle get out of bankrupcy. Tie this to an article several weeks ago in the “Memphis Biz Journal” which predicts Delta will buy Pinnacle, plus the fact no one, not Delta, not Pinnacle, has said what will happen to the Pinnacle owned CRJ-900s (19 is the fleet size, I think), and I predict all 50 seat flying will be Pinnacle, plus those CRJ-900’s will come into the fleet. As for the Pinnacle owned Q-400’s and 340’s-don’t know, Pinnacle says they are getting rid of them, but it is easy to put First Class into a Q-400. I think this story on fleet composition has more to come.

    • XJT DX says:

      I believe the Q’s are all going to Republic to continue to fly for UA. they should all be gone by the end of this year. The last thing Delta wants is to help subsidize a competitor, it seems.

    • KH says:

      If you dig through the bankruptcy filings, you will see that Delta has agreed to take over Pinnacle’s fleet of 16 CRJ-900’s. They will be placed with a different contract carrier. The turboprops are definitely gone from Pinnacle. Delta and Delta Connection will remain 100% jet powered.

      • James K says:

        One thing I’ve never understood about Delta is how prop-phobic they are. For all the fumphering about fuel savings, they don’t want anything to do with fuel-efficient aircraft on short hops. ASA’s ATR-72s worked well in markets like ATL-AVL and ATL-VPS, but whenever DL has a chance, they retire them in the name of being an “All Jet Airline”. The only exception at this point is the SkyWest Brasilia fleet, which TMK are used for prorated flying, not the usual capacity purchase.

    • CF says:

      George – Pinnacle will not be flying the 16 CRJ-900s that flew for Delta before the Northwest merger. It will, however, keep flying the 41 that were with Northwest. (I think those numbers are right, but if not, they’re close.) It wouldn’t surprise me to see Delta move the big Comair jets over to Pinnacle and let Pinnacle focus on those operations. It could be similar to what US Airways did to Mesa – get a great contract and have them fly for cheap.

      The Q400s, as mentioned, are going to Republic to operate for United.

  15. Noah says:

    I think its a great thing for all involved.

    I don’t want to start a fight about WN, but what does it say about Garry Kelley who touted the 717 while hoping for the acquisition of Airtran, then,from the moment of apporval, does everything he can to get those planes off property. Was there new information? Or was this another ploy to reduce competition in the Domestic market?

    • Ron says:

      Gary has said that WN found out about the specific economics of flying the 717 only after the completion of the aquisition, when they finally had access to the FL books. That, plus the increased fuel costs of late 2011 and early 2012, caused WN to decide that the plane simply wasn’t worth the extra costs involved in operating a second fleet type.

    • CF says:

      Noah – Nothing wrong with starting a fight about Southwest. It seems very strange that he would tout how Southwest was excited about the airplane only to completely change his mind. I’m sure he got better information after the merger, but still… pretty bad.

      The people who are most angry are going to be the 717 pilots who had some sort of fence in the seniority agreement around them as long as 717s were still in the fleet. They aren’t going to be happy.

      • D-ROCK says:

        With ALL of the 717’s going to Delta, would it be possible for the 717 Air Tran Pilots to follow the airplanes to Delta (through some sort of WN/DL/Union agreement) instead of having to switch types to the 737’s in Southwest. If they buy the airplanes, someone has to fly them, and its either the AirTran Pilots or promotions (with retraining to a new ac type) from some regional outfits….

        • Ian L says:

          …or former DC-9 pilots, since aircraft size is only a little smaller and DL is okay paying DC-9 rates.

        • Sanjeev M says:

          I think the whole deal behind this is having Delta mainline pilots fly Delta planes. Maybe a few will come over from AirTran if needed but not many or else DL pilots will have a fit.

  16. Mike says:

    @ CF –
    thank you, thats a pretty good summary.

    some people have mentioned turboprobs/Horizon.
    these are covered under the new agreement, so theoretically those additional 76 seat planes could be a newly desgined large turboprob.

  17. A says:

    I’m always a fan of more mainline metal and less of those horrid CRJ’s. It also seems to make sense to me to reduce frequency and increase the size of the plane. Delta will save on fuel burn for sure if that’s their plan. It wasn’t all that long ago that small cities were served maybe once or twice daily with a 727. I consider it going backwards to be served 5x with a 50 seat regional.

    As for the 717’s the oldest are already 13 years old. I would think a good replacement age is 25 years, or another 12-19 years from now and by then there should be (hopefully) some new options in that size of aircraft. Savvy move I’m thinking.

  18. Tp says:

    Brett,
    With all due respect this is not a smokin raise for the Delta pilots. It is a partial restoration to their pay rates. In 2015 Delta pilots will still be earning 20% less than 2000, not adjusted for inflation! and their pension is still gone. The public is woefully unaware of how pilot labor took an enormous pay cut since 9-11.

    • Jason H says:

      That may be true, but when compared to their counterparts at other major airlines they appear to be better off. Internal comparison is one thing, but external comparison is also important. I’m not saying I know for sure they are better off, but they certainly appear to be overall.

    • This isn’t 2000. This is 2012. The current airline marketplace can’t support pre-2001 pay levels. We all have to live in the real world, not on Fantasy Island.

  19. I’m curious if the refinery purchase had any bearing on this, since the refining and subsequent swap of fuel only only covered fuel for DL owned planes and not regional providers does this ultimately make the 717’s cheaper to operate?

    • CF says:

      I don’t recall this refinery deal only covering the DL owned airplanes. I thought it was for all domestic needs. Since fuel is a pass through cost for regionals, I assume Delta will be using the fuel for regionals as well.

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  21. SAN Greg says:

    You’re one smart grasshopper Delta! Although the 717’s may not be the most fuel efficient bird around, the issue is mitigated by you refining your own. Brilliant!!!

  22. Dale says:

    Very interesting article from the DL perspective. These moves might just put DL head and shoulders above the competitoin in the domestic markets. And *if* the remaining CRJ/ERJ are used for small communities and not wasted elsewhere, it might not be as much of a bloodbath for places like Erie, Montgomery, and Moline.

    The other side of the coin — what this means for (and about) Southwest — seems to be largely absent from most of the discussions, blogs, press items and chat boards. Unless something unforseen happens…which is possible of course…Southwest’s combined WN+FL fleet will shrink by several frames. Out of this reduced fleet, we know they want to expand quite a bit internationally. Throw in even rather modest domestic growth to the legacy Southwest system in the next few years, and there simply aren’t too many planes left to serve the legacy AirTran system. Unless they have something else up their sleeves for additional aircraft, it seems widespread gutting of the AirTran network is on the horizon. And the purchase of AirTran is less and less of an acquisition/merger event, and more and more of an expensive asset buy.

    • The other question is if the purchase of AirTran was also about the elimination of a competitor… This probably was one of the major drivers for this.

    • XJT DX says:

      I know Southwest gets LOTS of utilization from it’s frames. Could eliminating slack (if any) in the AirTran system partially make up for the exiting aircraft?

  23. Gary says:

    Hard to imagine Delta “Customer Service” sitting by idly while conditions actually get more comfortable and convenient for their customers – I’m sure they’ll find a way to make this worse for all involved.

  24. dave c says:

    Looks like Delta is way ahead of the crowd, good for them.

  25. Eric says:

    It’ll be the end of 2015, possibly early 2016 before all the 717s are on property. The CRJ-100/200s are old, the eldest are starting to hit their cycle limits. If the CRJs are being phased out over the same time frame than this isn’t all that astonishing – half the affected planes would have retired by age regardless, the other half will have been accelerated perhaps 4 or 5 years. But in exchange for retiring airplanes that would have retired soon anyway Delta gets a bunch of new large RJs. I expect American and United to play this strategy too – promise a massive reduction of RJ fleet (among planes nearing their lease or cycle lives) and limit RJ growth to mainline growth in exchange for upsizing of the remaining RJs.

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