Boeing has now officially launched its 737 with new engines – it’s being called the 737 MAX to counter the A320neo. What do you think of the MAX? Will it be a success?

It’s now official. Delta has decided to order a hundred 737-900ER aircraft. These aren’t the new engine versions but just plain old 737s, stretched to an insane length. With so many airlines ordering Airbus A320neo aircraft and showing great interest in Boeing’s proposed re-engined 737, why would Delta go with the old 737-900ER? My mind instantly went to baseball.

Before we talk about America’s pastime, let’s talk details first. Delta ordered one hundred 737-900ER aircraft to begin replacing its 757, 767, and A320 fleets. I assume this can replace some of the A320s coming off lease as well as the older domestic 767s. Add the 757s on top of that, and this is only a start. The airline will need a lot more airplanes to completely replace these fleets. My assumption is that you’ll see these fit right in with the domestic and Caribbean route structure.

The 737-900ER holds almost as many people as a 757. Continental has it configured with 173 seats right now in a similar configuration to what I’d expect to see from Delta, so it’s maybe a 10 to 15 seat cut versus the 757. It doesn’t have the range of the 757, so it’s not going to be serving Europe anytime soon. But there is plenty of room for this airplane to take over within the US for Delta. But why bother?

Most airlines have been clamoring for the re-engined A320 and 737 families and the promises of lower fuel burn. American may have ordered current generation aircraft, but that’s to replace its MD-80s, which it sees as needing replacement sooner rather than later. So why wouldn’t Delta just wait and order airplanes with newer engines since its existing fleet still has a few good years left?

It’s because Delta seems to look at the world in a different way, and that’s where baseball comes to mind. If you’ve read Moneyball, you know the story of the Oakland A’s. Being a small market team, the A’s couldn’t compete on revenue so they had to get creative to build a competitive team. They decided to flip baseball’s knowledge on its head. The A’s believed that the traditional way of valuing players wasn’t necessarily the best judge of actual performance and there were other metrics to use that would help Oakland build a team without breaking the bank. It worked and Oakland was initially able to create low dollar, high quality playoff-bound teams.

I see a similar thing going on at Delta. Everyone is clamoring for the newly-engined aircraft to the point where Boeing was forced to announce the new 737 before it wanted, just so it could win an order from American. But Delta sees that fever for new engines as providing an opportunity for it to do something different. Take a look at this quote from CEO Richard Anderson:

A key component of Delta’s strategy is making prudent investments for the future while maintaining our financial and capacity discipline

Yes, better fuel efficiency is very important, but not if the initial cost of buying that fuel efficiency is so high. This is how Allegiant justifies buying MD-80s, and it’s how Delta seems to be looking at its current fleet decisions. (It also explains why Delta has been buying up MD-90s on the used market.) These airplanes do still provide better fuel efficiency over the existing fleet, but the initial cost is much less than going for one of those newer-engined aircraft. The math works for Delta because of the way others behave.

We don’t know anything about Boeing’s pricing of its re-engined 737 yet, so let’s look at Airbus for an example. An A321 lists for $99.7 million. The new engine option is an additional $6.2 million. That might not seem like a huge difference, but remember that we’re talking about list prices.

With the A320neo selling like hotcakes, you can bet that the discounts wouldn’t be as steep compared to the current generation models. Think of it as a year-end model clearance. Cal Worthington would be proud.

Lower acquisition costs give the airline more flexibility. When you have higher variable costs and lower fixed costs, you can think about scheduling your fleet in different ways. It gives you some flexibility that Northwest has known about for years. Why do you think those DC-9s are still flying 40 years down the road? They’ve been a great asset for the fleet, even if their time is finally coming to an end.

Now, it’s not like Delta is a small market airline and can’t afford more expensive airplanes. It’s just seeing a piece of the market that’s being undervalued and is trying to take advantage. That’s smart.

In case you missed it, American has decided to buy an insanely large number of airplanes. With 460 orders and another 10 million options (ok, maybe just 465), this was easily the largest order ever for an airline. Not only did American order a lot of airplanes, but it gave the lion’s share to Airbus, a huge coup for the manufacturer. This is a huge chunk of change, so why is American, the airline with one of the weaker balance sheets around, playing with fire? A few reasons. This might actually be a smart move.

Unfortunately, we don’t know a ton of details about American’s plans just yet. We do know that American will buy 100 more current generation 737s, 100 737s with new, more efficient engines, 130 current generation A320 series airplanes, and 130 A320neo (new engine option) series airplanes. That comes to a total of 460. How will this massive buy fit into the airline’s fleet? That remains to be seen since American hasn’t said which versions of each series it will take. But we do know something.

When this order is fully filled, the MD-80, 757, and 767-200 will have disappeared from American’s fleet. The MD-80 retirement is no surprise. American has slowly been replacing those with 737-800s, and this will be the nail in the coffin for the older technology, less fuel efficient “Mad Dog” aircraft. I know a lot of people hate MD-80s, but I do have a special place for them. Soon enough, there won’t be any Douglas airplanes flying. Sad.

But time marches on, and it was a given that this would happen. Today, American has 214 MD-80s left in the fleet with 154 737-800s. There were previously 54 737-800s on order, so really, there were just 160 MD-80s that still needed to be replaced. That will undoubtedly happen with the 737 and A320 current generation airplanes on order in some form.

Then there’s the 757. It’s a great airplane that uniquely can fly passengers across the Pond to Europe, over to Hawai’i and into a variety of hot and high locations with ease. No other airplane has been able to duplicate this with so few seats, and even though it’s out of production, the airplane is still a strong performer. American has decided that it can replace it, but I don’t think that will be with one airplane. The 737 can do Hawai’i, the A321neo and next gen 737s should be able to get to Europe. It probably won’t be a one size fits all solution, but with these new-engined airplanes, there is finally a way to replace the 757.

The 767-200 is a niche airplane that primarily flies the JFK to LA and SF routes. That will be easy to replace, and probably should be toast sooner rather than later.

That’s pretty much what we know. The problem, as mentioned, is that we don’t know which airplanes in the series American will actually take. It notes that it has flexibility and can opt for any family member in each series, specifically the 737-700, 737-800, 737-900ER and the A319, A320, and A321 are mentioned. So what will the counts look like of each? We don’t know, and American probably doesn’t know either. The airline does like to talk about what amazing flexibility it has in this deal. It can make changes as it sees fit over time. One thing is clear; this will add a lot of airplanes to the fleet, and it reintroduces Airbus into the Boeing-loyal airline.

I’m still surprised that American bothered ordering from both Boeing and Airbus. It seems to me that Airbus had this thing sewn up thanks to Boeing’s refusal to move on an heir apparent to the 737 while Airbus had the A320neo. When Boeing finally budged (note that the new engine 737 isn’t approved yet by Boeing’s board but is part of the order), it was able to squeeze back in to the race. But why not pick one over the other? It would seem that with a re-engined option, one manufacturer could fill the need. But I think it’s all about money.

As part of this deal, there’s no doubt that American went back and forth to both manufacturers and played them off each other. They got the absolute best deals they could and then, they took them both. That’s a great move. There will be enough airplanes in each fleet to really not make much of a difference whether there’s one type or two. And this way, American can walk away with big money. In fact, the first 230 deliveries are already covered by financing from the two manufacturers. It’s like American is the kid who went up to its parents and asked for money . . . and dad handed over his whole wallet.

But with all these massive orders, American is still going to have a lot more airplanes than it has today. Let’s assume that American retires all its 757s, 767-200s, and MD-80s. That’s 299 airplanes out of the fleet but 460 coming in. Huh? That’s huge growth, and it doesn’t even count the options. I can’t imagine a need for that much growth, so how will this play out?

Some of it could be counting on the new-engined aircraft replacing some of the current generation 737s and A320s that come in, but there could be more to it. And that could lie with American Eagle.

American also announced that it will go ahead in spinning off American Eagle into a separate company. As part of that, the Eagle pilots got a guaranteed path into American with 35 percent of new hire pilots at American required to come from Eagle. American likes to say that it’s spinning off Eagle so that it can fly on its own and can start working for other airlines as well. Yeah, right. Eagle is expensive compared to other providers, and its chances aren’t great for getting new flying. The reality is that American really just wants to start looking for other airlines to do some of its express flying for less. So it spins Eagle off and slowly shrinks it into oblivion.

But remember, today American flies nothing smaller than the 140 seat MD-80. What if it chooses to get A319 and 737-700 airplanes as part of this order? You figure those would fly in around a 120 to 124 seat configuration. With that smaller airplane, could American start bringing mainline flights back to places that are served with 70 seaters today?

It might be a stretch, especially since my assumption is that the pilots aren’t going to work for less to win that flying back. But there are a lot of routes out there that are on 70 seaters today, like Chicago to Atlanta, that might work better with a larger airplane. American hasn’t had that type of capacity for years, so we have no idea how the airline would use it. But it could be a way of reducing dependence on Eagle, if labor is willing to take on the challenge.

In the end, we really don’t know what American’s strategy is. I doubt American even fully knows what it’s going to do with all these airplanes. But it is encouraging to see the airline make these moves. American is finally, actually, going to try to do something about its cost problem instead of continuing to whine about how others will eventually catch up. With sweetheart financing from the manufacturers and much more fuel efficient aircraft, this should help the airline keep costs down. If only we had more details to know for sure . . .

[Original Aircraft Photo via Flickr user JF10/CC 2.0]

That’s the question. What will Boeing do? The Airbus A320neo has been a hot seller at the Paris Air Show this year, and even American is said to be in talks with Airbus about buying. (This sounds like an effort to get Boeing off its butt, but that’s just me.) So what will Boeing do? Will it go for a 737 with new engines? An all new 797 to replace the 737? If it wants to keep winning narrowbody orders, it has to do something. The question is . . . what?

When you think of air shows, you probably think of a warm summer day, some cool flying demonstrations to show off military might, and a few static displays of airplanes to walk through. That’s the core of any air show, but for the premier airshows in the world, that’s more of a side distraction than anything else. This week is the biennial Paris Air Show, and what you see happening in the air and on the ground is just fluff. This show is all about doing deals behind the scenes.

Paris and Farnborough (in the UK) take turns being the premier air show every other year. This year, it’s Paris. There are definitely some very cool flying demos, including the A380 (despite yet another wingtip mishap that almost scrubbed the flight) and a bunch of military flights as well. Why do they bother? They’re trying to get sales. Some airlines, aircraft manufacturers, and suppliers like to hold out to make a big splash at an air show with a big order.

This has never made sense to me. If I were ordering some airplanes, I’d rather tell the manufacturer to save all that wasted money thrown into air show displays and pass the savings along to me. But that’s not how it works. Instead, everyone goes and hangs out in the individual company “chalets” and has a grand old time. During leaner years, the smiles are few and far between, but so far we’re off to a hot start in Paris with almost 300 aircraft orders on the first day alone.

Take a look at some of the aircraft orders that have been announced so far. These are just aircraft orders. There are plenty of other deals with suppliers for a variety of other things as well.

• Air Lease, the new big aircraft lessor started by former ILFC chief Steven Udvar-Hazy signed up for 50 of the next generation Airbus A320neos with options for 11 more down the road. The company also ordered 20 Boeing 737-800s with 4 options, 11 Airbus A330s, 5 Boeing 777-300ERs, 5 Embraer 190s, 4 Boeing 787-9s, 1 lonely Airbus A321, and a partridge in a pear tree. All of these will be leased out to different airlines.
• Aircraft lessor GECAS ordered 60 of the Airbus A320neos. It also picked up 15 ATR 72 turboprops with 15 options along with 2 Embraer 190s. Rumor has it we can expect 2 Boeing 747-8 freighters to be ordered today. As with Air Lease, these will all be leased out.
• SAS out of Scandinavia ordered 30 of the Airbus A320neos and kept 11 options. SAS has struggled a lot lately, so hopefully they’re still around when it comes time to take delivery. These will replace the older MD-80s.
• Sriwijaya Air (say that three times fast) ordered 20 Embraer 190s to fly around Indonesia along with another 10 purchase rights. What’s the difference between a purchase right and an option? I have no clue.
• Kenya Airways ordered 10 Embraer 190s with options for 10 more.
• Bombardier picked up an order for 10 of its new C-Series airplanes with 6 options from a mystery buyer. This will be a launch customer. So who is it? We don’t know, but we do know that Bombardier says it’s a “major network carrier.” I’m eagerly awaiting news of who that might be, but I can’t imagine it’s a US-based airline.
• Boeing received one order for 15 of its 747-8s and another for two of the big birds. Who ordered them? It’s a secret. Again. While it wouldn’t surprise me if the two were for private owners, those 15 have to be for a major airline.
• Qatar Airways picked up 6 777-300ERs. It loves making noise at air shows.
• Saudi Arabian beefed up its A330 orderbook with four more.
• Almost lost in the shuffle, Air Astana out of Kazakhstan ordered 2 Embraer 190s with 2 options.

If you’re at Paris this week, enjoy all that drinking and schmoozing. If you’re here at home and you’re interested in this kind of stuff, I would recommend following Flightglobal. Those guys have put together some great coverage on what really is a pretty mundane subject for anyone outside the industry.

[Original photo via Flickr user slasher-fun/CC 2.0]