Issue No. 832

U.S. Sues to Split Up American and JetBlue

Justice Calls the Northeast Alliance Anticompetitive; the Airlines Vow to Fight Back

Pushing Back: Inside the Issue

We thought it could happen when the U.S. Justice Department (DOJ) said it was looking into the American Airlines-JetBlue Airways Northeast Alliance. And it did. Last week, the DOJ filed a suit in the U.S. District Court for the District of Massachusetts alleging that the Northeast Alliance is anticompetitive. Also not surprising: Both airlines immediately fought back. American CEO Doug Parker flatly said of DOJ, "They are wrong, and we will prove it."

Consensus seems to be that the DOJ's case is unlikely to unwind the alliance. The two airlines may be forced to divest more slots at congested Eastern airports, but the alliance will stand. But the suit could have a chilling effect on further consolidation, or "consolidation-lite." And although the structure of the American-Alaska Airlines alliance on the West Coast is different, it remains to be seen if that deal will also come under scrutiny.

Elsewhere in this issue, Delta Air Lines CEO Ed Bastian hinted that the carrier could add Boeing 737 Max aircraft to its fleet. If true, it would be the carrier's first major Boeing order in a decade. Airbus jumps into the eVTOL sector and lends its huge credibility to so-called "air taxis." And bookings surged by, in some cases, triple digits in the days after the Biden administration announced the U.S. will start admitting vaccinated travelers in November.

The Airline Weekly Lounge Podcast

This week in the Lounge, Edward Russell and Madhu Unnikrishnan recount the Skift Global Forum and their chats with the leaders — or incoming leaders — of Air France-KLM and Southwest Airlines. And they debate whether the U.S. Department of Justice will be successful in its suit to break up American Airlines and JetBlue Airways in the Northeast. For a full archive of the podcast, go here. A new episode drops every week.

Weekly Skies

The Justice Department (DOJ) on September 21 challenged American Airlines‘ and JetBlue Airways‘ Northeast Alliance in federal court. The suit filed in federal district court for the District of Massachusetts calls into question the alliance and refutes the airlines’ claims that the deal would increase competition along the Eastern Seaboard.

In its suit, DOJ claims the two airlines will “effectively merge their operations” at Boston, New York John F. Kennedy International Airport, LaGuardia, and Newark Liberty. It will “eliminate significant competition between American and JetBlue that has led to lower fares and higher quality service for consumers traveling to and from these airports,” DOJ said.

“The United States and plaintiff states bring this action to prevent the hundreds of millions of dollars in harm to consumers that will occur if these two rivals are permitted to maintain this modern-day version of a nineteenth century business trust.”

Arizona, California, D.C., Florida, Massachusetts, Pennsylvania, and Virginia joined the federal government in the suit.

In its complaint, DOJ hinted that it thinks airline consolidation has gone too far, boding ill for future mergers in the industry if even this alliance comes under scrutiny. But the agency also noted that consolidation has long been American’s strategy. “As American’s current CEO explained in 2012: ‘With fewer airlines, there are fewer of us trying to get the same number of customers,'” DOJ said, referring to Doug Parker speaking just before American merged with US Airways.

In fact, DOJ points out that JetBlue itself once opposed consolidation and that the carrier has increased competition, particularly in Boston, and has driven fares down. “By effectively absorbing JetBlue’s operations in Boston and New York City, American can reduce investments not just in those cities, but also in other parts of its network where it otherwise would maintain or add service,” the complaint said. “As a consequence, consumers across the country will have fewer options and pay higher fares.”

“Well they are wrong, and we will prove it,” Parker said on the expected suit’s anti-competitive allegations during a Washington Post Live event last week. “It is entirely pro-competitive.”

JetBlue CEO Robin Hayes went further in defending the alliance in a lengthy memo to staff on Thursday. While similarly touting the partnership’s competitive benefits, he went a step further and blamed the DOJ for hampering JetBlue’s ability to expand in the Boston and New York areas, citing incumbent carriers gate and slot portfolios at the highly sought-after airports. Those “obstacles to growth” led JetBlue into the alliance with American, Hayes said.

“JetBlue’s commitment to competition and low fares remains as strong as ever,” he said. “This is not at all like a merger with American – we have two different business models and are not working together on pricing.”

Both American and JetBlue touted growth at the four northeastern airports as examples of the benefits for their alliance. American has launched new nonstops between JFK and Athens, Delhi and Tel Aviv under the pact, while the JetBlue has — or will — add nine new destinations and 32 new routes to its map. JetBlue has even delayed the retirement of 30 Embraer E190s to operate all of its new alliance flights.

The suit is the latest salvo in an intensifying battle over the Northeast Alliance. Sen. Richard Blumenthal (D-Conn.) earlier this month in a letter to Transportation Secretary Peter Buttigieg raised concerns about the alliance. The alliance, approved in the waning days of the Trump administration by then-Transportation Secretary Elaine Chao, falls afoul of President Joseph Biden’s push to make the U.S. economy more competitive.”

“The Trump [Transportation Department] decision to terminate its informal review of the joint venture between JetBlue and American was pushed through with only 10 days remaining in the administration, without adequately airing the competitive issues raised by the agreement not to compete between two major airlines,” Blumenthal said. “What is more, in a highly unusual move, the Department did not afford the public and other industry participants any opportunity to comment on the competitive implications of this agreement.”

Biden’s executive order specifically notes that four airlines control more than two-thirds of the U.S. airline market. “I am concerned that the Northeast Alliance is exactly the kind of arrangement that has led us to this point and that will lead us to even further consolidation in an already concentrated industry,” Blumenthal said in his letter. “Under the circumstances, this arrangement deserves more scrutiny.”

DOJ’s suit is the first concrete action out of the review of the partnership that it launched this spring. The review followed rumors that the Biden Justice Department was increasingly uncomfortable with the deal. But for DOJ to order the Department of Transportation (DOT) to undo a deal would have been a highly unusual step. Instead, DOJ is challenging the alliance in federal court.

The Northeast Alliance goes beyond a codeshare and allows the two airlines to coordinate schedules — but not fares. Competitors, like Spirt Airlines, have criticized the deal as a “pseudo-merger.” Critics say the alliance would block out access at slot-restricted airports, like New York LaGuardia, essentially create a duopoly with Delta Air Lines there and in Boston, and would allow American to dominate Washington Reagan National Airport.

The DOT required American and JetBlue to divest at least seven slot pairs at JFK and six pairs at Washington National airports as a condition of its approval. These slots would become available to other carriers deemed “eligible” by the regulator.

But proponents of the alliance call it a “smart” strategy that address both American’s and JetBlue’s shortcomings in a highly competitive market. “I think this is a brilliant partnership,” Saikat Chaudhuri, a director at UC Berkeley’s Haas School of Business and College of Engineering who studies the airline industry, told Airline Weekly earlier this year.

American’s other alliance, with Alaska Airlines, has not come under as much industry and regulatory scrutiny. But it, unlike the Northeast Alliance, is a more traditional codeshare deal. And, with Alaska’s joining the global Oneworld alliance earlier this year, the benefits of the American-Alaska deal look more aligned with a traditional alliance.

Madhu Unnikrishnan and Edward Russell

U.S. Bookings Pop as Entry Restrictions Ease

British Airways, Latam Airlines Group, Lufthansa, Swiss and Virgin Atlantic are among the growing number of carriers seeing a surge in U.S. bookings since the Biden administration said on September 20 that it would ease entry restrictions for vaccinated travelers from November.

Latam was one to report an eye-popping number: Bookings for flights between Brazil and the U.S. jumped 350 percent in the 24 hours after the announcement compared with the day before. Although the carrier did not provide a base off of which the jump occurred, the rapid rise is a confirmation of the “pent-up demand” for air travel that airline industry leaders have said lies in wait for restrictions to fall and borders to open. Latam operates Miami and New York John F. Kennedy flights from its São Paulo Guarulhos hub, and said the reopening could move up its resumption of Boston and Orlando flights.

Most eyes, however, are focused on the return of European holidaygoers who have effectively been blocked from the U.S. since March 2020. British Airways and Virgin Atlantic both said they saw triple digit booking increases — Virgin up to 600 percent — overnight after the announcement, while Lufthansa reported a more sedate 40 percent increase and Swiss a “strong increase.”

“It was a pleasant shock to get that news,” Air France-KLM Group CEO Ben Smith said Wednesday at the Skift Global Forum in New York. While he said it was too early to forecast any change in demand, Smith noted that he expects the year-end holidays will be strong for the group.

Although the reopening has improved many carriers’ year-end holiday outlook, the real focus is on the peak summer travel season next year. That’s when many Europeans are expected to pack their bags for — in many cases — delayed holidays to the U.S., whether it be sightseeing, visiting friends and relatives, or maybe just a long-planned trip to a Disney park.

“By the summer, we expect another jailbreak, and strong traffic on the north Atlantic,” wrote Cowen & Co. analyst Helane Becker on September 21. She expects the major U.S. carriers American Airlines, Delta Air Lines and United Airlines will be major beneficiaries of that boom.

American CEO Doug Parker, speaking at a Washington Post Live event on September 21, said the easing of restrictions was “good news,” and that it would “absolutely will drive bookings.” He did not provide any data on bookings since the announcement.

Returning travelers mean more flights will come back as well. While few carriers have finalized their summer 2022 schedules, there is a lot of room to come up from 2021 levels. Transatlantic capacity between Europe and the U.S. was down nearly 64 percent from June to August compared 2019, according to Cirium schedules. Comparatively, capacity within Europe was down 38 percent and within the U.S. just 9 percent over the same period.

Swiss is among the first airlines to set a return date for one of its suspended U.S. routes since the announcement. Flights between Geneva and New York JFK will return in mid-December, just in time to pick up some of that pent-up holiday travel traffic.

Edward Russell

European Recovery Accelerates as U.S. Flounders

Lufthansa and EasyJet are looking keenly to the fall and winter as the European travel recovery seems to have found firm footing. This is a turning of the tables compared with their U.S. peers, which almost universally have lowered expectations for the fall after the Delta variant took a big bite out of their previously rosy outlooks.

“Current bookings indicate a sustained demand recovery,” the Lufthansa Group said in a statement on a new €2.1 billion ($2.5 billion) capital increase on September 19. As such, the group — including its namesake carrier as well as Austrian Airlines, Brussels AirlinesEurowings and Swiss — expects positive cash flow and an operating profit in the third quarter.

EasyJet said on September 18 that there was a “surge” in UK bookings for travel this fall and winter after the UK government removed pre-departure testing requirements for fully vaccinated travelers returning to the country, beginning October 4. The airline did not provide a base off of which bookings jumped. The UK represents half of EasyJet’s scheduled capacity in September, according to Cirium data.

And earlier in September, Ryanair said strong pent-up demand was translating to stronger-than-expected bookings in October and through the fall.

Although no carrier is claiming that European travel has emerged from the crisis, the outlooks from three of the continent’s largest carriers show growing optimism at a time when previously buoyant U.S. carriers are toning down the positive rhetoric. Earlier in September, most U.S. carriers — including Alaska Airlines, American Airlines, Delta Air Lines and United Airlines — pulled back on fall outlooks citing the negative impact of the Covid-19 Delta variant. United, as well as Southwest Airlines, were also among those that cited a slowdown to revise back expectations of a third-quarter profit.

“There’s still really robust sort of underlying demand in terms of leisure travel and a desire for business travel to pick back up,” Alaska Chief Financial Officer Shane Tackett said on September 9. “We’ve just got to get through this wave and hope that there’s not another one — or hope that we’ve all adopted [a] view of life where we’ve got the vaccine and we’re moving on.”

Pent-up demand or not, the U.S. travel outlook for the fall looks moribund as airlines await a delayed business travel recovery and the year-end spike in holiday leisure flyers.

It’s a very different story in Europe. Corporate travelers are returning — whereas their numbers have plateaued in the U.S. — supporting Lufthansa’s plans to resume more flights. In addition, the group anticipates U.S. restrictions on European travelers to ease by year-end allowing it to resume more transatlantic flights, which are a key moneymaker for Lufthansa. All of this comes as the group filled more seats while operating more flights than planned in August, and expects the same in September.

The growing divergence comes as European vaccination rates have surpassed those in the U.S. In addition, EU citizens are increasingly supportive of national proof-of-vaccination mandates for many indoor activities. These added restrictions are likely helping fuel the travel recovery, especially among corporations who must weigh their duty of care against the business upsides of sending roadwarriors back out on the road.

This positive picture is paying off for Europe’s carriers. Lufthansa’s capital increase will allow it to repay all of the German state aid that it received in 2020 by year-end, which is earlier than previously planned. The funding plan comes on the heels of a £1.2 billion ($1.6 billion) rights issue from EasyJet that proceeds from which will be used to fund growth and fortify the discounters position in key European airports. And J.P. Morgan Analyst David Perry wrote on September 17 that there is increasing pressure on IAG for a second rights issue after a £2.5 billion one in September 2020.

Lufthansa will use proceeds from its capital increase to repay the €1.5 billion Silent Participation I in German stabilization funds, and for working capital. It plans to pay off the remaining €1 billion Silent Participation II by year-end eliminating all remaining state obligations from its balance sheet.

“We have always made it clear that we will only retain the stabilization package for as long as it is necessary,” said Carsten Spohr, CEO of Lufthansa Group, in a statement. “We can now fully focus on the further transformation of the Lufthansa Group.”

That transformation includes achieving €3.5 billion in structural cost savings by 2024 to become a more efficient carrier. The group has achieved roughly €2.1 billion of these savings, including €1.1 billion from workforce reductions alone. Lufthansa is also streamlining its fleet by replacing most four-engine jets — including the Airbus A380 superjumbo — with more efficient two-engine models like the Airbus A350, and consolidating its affiliate carriers.

Edward Russell

In Other News

  • A U.S. bankruptcy court has granted Aeromexico another extension to the exclusive period for it to file a Chapter 11 reorganization plan. The airline now has until October 8 but said last week that it intends to submit its plan by around September 30. Of the three big Latin American carrier bankruptcies during the crisis, only Avianca has filed a plan to date.
  • U.S. regional Republic Airways will build a new headquarters and training center in the Indianapolis suburb of Carmel, Ind. The new facility will consolidate the carrier’s scattered training operations from Cincinnati, St. Louis and Indianapolis into one location. Republic operates more than 220 Embraer E-Jets under contract for American Airlines, Delta Air Lines and United Airlines. In other U.S. regional carrier news, Mesa named Torque Zubeck its chief financial officer.
  • Things remain pretty dire for Cathay Pacific, although the airline remains optimistic that the year could end well. Cathay reported its August traffic was down 92 percent, compared with 2019 levels, and its capacity was down 87 percent. The carrier likes the trend, though: It flew just 135,000 passengers in the month, a 278 percent increase from last year, but still 95 percent down from 2019. Given continuing travel restrictions, Cathay says it will keep its August capacity level through the end of the year.

    Cargo was an entirely different picture for the Hong Kong-based airline. Cathay said that although August usually is a slow month for cargo, it wasn’t this year. Cargo traffic rose 9 percent from July and the carrier is operating a peak-season cargo schedule. Cathay is adding two more Boeing 777 preighters to its cargo fleet. “For cargo, market indicators suggest a strong peak season driven by the need for inventory replenishment, against a backdrop of ongoing air cargo capacity constraints and disruption to supply chains due to seaport congestion,” said Chief Commercial Officer Ronald Lam.
  • Speaking of cargo, FedEx, which had been reporting record quarter after record quarter, took a step back. Although demand remains high, the company is struggling with hiring and retaining staff and competing with other companies for talent. FedEx said labor troubles bumped its costs up by $450 million and resulted in network inefficiencies. As an example, the company said 600,000 packages a day are rerouted due to staffing shortages. Air cargo remains strong, even though capacity is down 10 percent from before the pandemic. International capacity remains “scarce,” President Rajesh Subramaniam said. FedEx reported net income of $1.1 billion on revenues of $22 billion, generating an operating margin of 6.4 percent in its most recent quarter.

Edward Russell & Madhu Unnikrishnan

Expand Section

Landing Strip

The good news is that the U.S. Transportation Department (DOT) is extending slot waivers until March 26, 2022 for international flights. The bad news? The agency is considering ending the waivers for domestic flights.

The waivers went into effect in March of last year when the Covid-19 pandemic brought the airline industry to its knees and have been extended through the summer season. DOT now says the waivers could expire on October 31. The change would affect three slot-restricted airports — New York John F. Kennedy, LaGuardia, and Ronald Reagan Washington National Airport — as well as IATA Level 2 airports: Chicago O’Hare, Newark, San Francisco, and Los Angeles International Airport.

DOT in a notice of the extension said international flights remain at 88 percent below 2019 levels and will be more than two-thirds below 2019 levels by the end of this year. Airlines would have no way to operate the slots 80 percent of the time, as required by DOT in its “use-it-or-lose it” slot rules. Before the waivers, slots not used 80 percent of the time were forfeited to DOT.

In making that determination, DOT noted that travel restrictions remain in force around the world and distribution of vaccines has been uneven, depressing demand for international travel. The determination also could be informed by fears of retaliation by other countries that have their own slot waivers in effect.

But domestic travel has rebounded. DOT pointed to a spike in travel in July as proof that domestic demand is healthy. “DOT believes it is becoming apparent that Covid-19 is causing structural and operational changes to the airline industry; the industry is adapting; and the issuance of waivers should hinder that adaptation,” DOT said in its notice.

Both Southwest Airlines and JetBlue support the return to the use-it-or-lose it rules for domestic flights, DOT said, with the Dallas-based airline pointing to a “resurgence in demand” since March of this year. DOT tends to agree.

“It is the policy of the [DOT} to encourage high utilization of scarce public infrastructure,” DOT said.

Madhu Unnikrishnan

Airport Briefs

  • The European Commission has awarded Vueling 18 slots at Paris Orly divested by Air France as a condition to its Covid relief package from the French government. The IAG-owned discounter will base Airbus A321s at Orly and begin using the slots from November, said Vueling President Marco Sansavini. The additional access to Orly could push Vueling ahead of EasyJet as the third largest carrier at the airport after Air France and its budget affiliate Transavia, Cirium schedules show.
  • The A1 pier in Terminal A at Newark Liberty airport will close on September 30 in preparation for the opening of the new Terminal 1 next spring. Air Canada and JetBlue flights will move to the other two piers in Terminal A, and to Terminal B. The A1 pier will be demolished for construction to continue on the new $2.7 billion facilities. United Airlines, which has a large hub at Newark, plans to begin flights from 10 gates in Terminal 1 next April.

Edward Russell

Expand Section

State of the Unions

  • Norse Atlantic Airways has struck its latest deal with a union. The carrier, which has yet to take its first flight, has sought to fend of the labor challenges that bedeviled Norwegian Air, through a charm offensive with unions. Earlier this year, Norse Atlantic met with the U.S. Association of Flight Attendants to pledge to uphold union-friendly hiring practices. Similarly, the carrier last week met with the British Airline Pilots Association (BALPA) to strike a deal to add “hundreds” of jobs in the UK. Details of the deal were not released, but both parties lauded it, with BALPA adding that it was “impressed” with Norse Atlantic’s commitment to labor.
  • In a sign of growth and of its forecast for a rosier 2022, AirBaltic said it plans to hire 320 staff, 120 pilots and 200 flight attendants, in advance of the summer 2022 peak travel season. Many of the pilots the carrier will rehire had been let go when AirBaltic downsized during the pandemic. AirBaltic plans to take delivery of eight additional A220s next year.
  • JetBlue‘s cabin crew union has filed suit alleging the carrier threatens to discipline flight attendants who take sick days. In a lawsuit filed New York state court, the Transport Workers Union further alleged that JetBlue requires flight attendants to provide a doctor’s note when they take one or two sick days, in contravention of city and state laws that say notes are only required if an employee takes three ore more sick days. “They created an abusive atmosphere by greedily scheduling more work than they can handle, and they are making their employees pay for their mismanagement,” TWU President John Samuelsen said. “Sick and stressed-out workers are being forced to come to work.”

Madhu Unnikrishnan

Expand Section

Sky Money

  • Aviation Capital Group closed a sale of $750 million in 1.95 percent senior unsecured notes due 2026 with a 7.728 percent yield-to-maturity. Proceeds will be used to purchase aircraft, repay debt and for general corporate purposes.
  • Gol has priced a $150 million add on to its 8 percent senior secured notes due 2026. The additional funds increase the facility, which was first priced in December 2020, to $650 million. Proceeds will be used for opportunistic aircraft deals like the one for 28 Boeing 737-8s it unveiled in August, as well as general corporate purposes.
  • JetBlue has repaid the $115 million outstanding under its CARES Act loan from the U.S Treasury. The debt, which was priced at 275bps over Libor, was borrowed to boost the airline’s liquidity in September 2020. Since then, the travel recovery has accelerated faster than many expected and JetBlue has been able to tap private sources for its capital needs.

Edward Russell

Expand Section

Routes and Networks

  • Following the U.S. decision last week to ease entry restrictions for vaccinated travelers from November, airlines are moving to capture what many think will be strong yearend holiday demand. Only one new route is planned so far: Condor will add service between Frankfurt and New York JFK from November 11. But the low-hanging fruit for many carriers is relaunching suspended services, something both KLM and Swiss will do this December.

    KLM will resume flights to Miami and Las Vegas in December. The return is an about face for the carrier that just re-suspended the routes earlier in September when the Dutch government briefly instituted a mandatory quarantine for travelers arriving from the U.S. And Swiss will resume flights between Geneva and New York JFK in December as well, as it seeks to capture pent-up holiday demand.
  • Startup Avelo Airlines is expanding its presence in Las Vegas a week after landing in Sin City. The carrier will connect Las Vegas and Eureka/Arcata, Calif., from November 18, complementing the Santa Rosa service that began earlier in September. Avelo will fly Boeing 737-800s on the route.
  • The growth strategy EasyJet laid out as part of its rights issue earlier in September is already in play on its map. The discounter will add five aircraft to its seasonal bases in Faro, Malaga and Palma de Mallorca from May 2022 for the peak summer season. EasyJet has not said what routes it will add with the jets. “We see so many opportunities for EasyJet in this period of recovery across Europe where legacy airlines will retrench and we are ready and able to grab them with both hands,” said CEO Johan Lundgren.
  • RwandAir will connect its Kigali hub with Goma and Lubumbashi in the Democratic Republic of Congo (DRC) from October. The airline says the new routes, which complement existing service to Kinshasa, will boost “diplomatic and commercial links” between Rwanda and the DRC. Rwandair will operate Bombardier CRJ900s and Dash 8-400s on the new routes.
  • Citing strong southern summer demand, Virgin Australia is adding two new Tasmanian routes in the coming months. The airline will connect Hobart and Adelaide from October, and Launceston and Perth from November. The routes join Launceston-Adelaide that launched earlier in September, and Virgin will also resume Hobart-Perth in October.
  • With news that the U.S. is dropping entry restrictions for vaccinated travelers, Emirates is beefing up its network to the U.S. The carrier now expects to operate 90 percent of its pre-pandemic capacity by December. From next month, Emirates will operate 78 weekly flights — 80 percent of its pre-pandemic capacity — to 12 cities in the U.S. Gauge is going up, too. The carrier will restore Airbus A380s on the San Francisco route; the type already has been reintroduced to New York, Los Angeles, and Washington, D.C.

Edward Russell & Madhu Unnikrishnan

Expand Section

Fleet

Delta Air Lines CEO Ed Bastian sees a “place” for the Boeing 737 Max at the carrier as it looks for opportunistic deals to reshape its fleet over the next decade. This would be Delta’s first major Boeing order in a decade.

“No news to report [but] we’re constantly talking to [Boeing],” Bastian told pilots in a webinar on September 20. “There’s certainly a place for [the Max] if we can figure out how to bring them in.”

Bastian expressed some surprise that Boeing and Delta had not yet reached a deal for the jets. Delta declined to comment for this story.

Delta stands alone among the four big U.S. carriers — American Airlines, Delta, Southwest Airlines and United Airlines — without either the Max in its fleet or on order. And both Southwest and United have used the crisis to place orders for hundreds of additional Maxes, including a deal for 200 737-8s and -10s from United in June.

The Max orders followed the FAA’s recertification of the jet last November after a nearly two-year grounding. Operators, including Alaska Airlines, Copa Airlines and Gol, all report a smooth return-to-service with passenger threats to book away from Max-operated flights proving unfounded.

And Delta has a first-hand source of information on the Max. Its equity partner Aeromexico — Delta owns a 51 percent stake in its parent Grupo Aeromexico — operated 14 737-8s and -9s at the end of June with orders for another 24 aircraft. And, in a vote of confidence for the Max, signed a lease for 12 more in July.

Delta has not sat out the pandemic recovery ordering spree. After retiring its Boeing 777s, MD-88s and MD-90s early in 2020, the airline has exercised options for 55 Airbus A321neos — boosting its firm commitments for the type to 155 aircraft. And in July, Delta unveiled deals to lease seven used Airbus A350s from AerCap, and buy 29 used Boeing 737-900ERs from Castlelake.

“We continue to see opportunity in the marketplace, not just for new [aircraft] but for gently used,” Bastian told pilots.

Delta’s last major Boeing order was for 100 737-900ERs in 2011. The carrier exercised several options for the jet in 2015 and 2017.

In addition to a possible Max order, Delta is looking at opportunities for more new and used A350s, he said. And in the airline’s talks with Airbus it may “potentially more A220s,” Bastian added.

Delta had outstanding orders for 45 A220s and 27 A350s — including the seven leased aircraft — at the end of June. It operated 50 A220s and 15 A350s, as well as 207 737 Next Generation jets, at the same time.

Edward Russell

Airbus Jumps Into eVTOL Sector

The electric aircraft market has gone from zero to 60 in just a matter of months, now that one of the world’s largest airframers has entered the race. Airbus said its Helicopters division is developing an electric take off and landing (eVTOL) air taxi that could take its first flight in 2023.

This is in stark contrast to Airbus archrival Boeing, which just last week committed only to consider alternative propulsion technologies in the near- to medium-term.

Meanwhile, Brazil’s Gol is committing to order up to 250 Vertical Aerospace eVTOLs through lessor Avolon and in partnership with Grupo Comparte to create an urban air taxi platform for country’s most congested cities. Gol’s proposed equity partner American Airlines also has a commitment for Vertical Aerospace’s VA-X4 aircraft.

Airbus unveiled the new concept aircraft, called the CityAirbus, last week in Toulouse during the airframer’s first sustainability summit. The CityAirbus is a fixed-wing aircraft, equipped with a V-tail and eight electric propellers. The aircraft is capable of carrying four passengers up to 80 km (50 miles) at an airspeed of 120 kilometers per hour. The airframer stressed the CityAirbus’ green credentials extend to noise — a crucial consideration at European airports — and said it only registers 70 decibels at landing. By comparison, an A320 exceeds 100 decibels at landing, according to FAA data.

Airbus has conducted about 1,000 km of test flights with initial prototypes, and said a final prototype for the CityAirbus will be ready by 2023, with regulatory certification expected by 2025.

Although several companies, like Archer, Wisk, Vertical, and others, have made headlines with splashy orders for eVTOLs, none has the heft of Airbus, which along with Boeing effectively splits the commercial aircraft market. Airbus’ entry into the eVTOL race lends the sector credibility and arguably brings eVTOLs closer to reality. And a further point cannot be discounted: Unlike the other companies in the sector, Airbus has long and close relationships with the world’s aircraft regulators, which gives further credibility to its aggressive projected timeline for certification of the CityAirbus.

The problem of how to solve the “last mile,” or the segment of a trip from a major hub to a smaller city, has long bedeviled airlines. Connecting hub airports with smaller markets can be done more profitably — and more sustainably — with a small eVTOL, rather than a regional jet and an eVTOL arguably would be more sustainable than a car carrying a single passenger, even across a major metropolitan market, for example from Los Angeles International Airport to downtown Los Angeles.

“We are on a quest to co-create an entirely new market that sustainably integrates urban air mobility into the cities while addressing environmental and social concerns,” said Bruno Even, CEO of Airbus Helicopters. “Airbus is convinced that the real challenges are as much about urban integration, public acceptance, and automated air traffic management, as about vehicle technology and business models.”

And it is this last mile and concerns about urban mobility that informs Gol’s deal. Vertical specifically called out congestion in metropolitan São Paulo as an impetus for its deal for 250 VA-X4s. “Our eVTOLs will transform how we travel around high population density cities that are clogged with traffic by taking to the skies with zero emissions aircraft,” Vertical Commercial CEO Stephen Fitzpatrick said.

Financial terms of the deal were not disclosed, but Avolon said that more than half of its 500-aircraft orderbook for VA-X4s has been spoken for. Grupo Comporte will provide the capital for the investment, Gol said.

Vertical’s VA-X4 tiltrotor features four electrically driven propellers and is capable of carrying four passengers more than 100 miles at a cruising speed in excess of 200 miles per hour. Gol expects Brazil’s regulators to approve the aircraft by 2024 with a forecast entry-into-service in Gol’s network by mid-2025.

Airlines around the world are scrambling into the electric aircraft race. United Airlines, American, Azul, and Virgin Atlantic are among the carriers that have made multi-billion dollar bets on the emerging technology.

Madhu Unnikrishnan

Fleet Briefs

  • Startup Fly Play has finalized an agreement with GECAS for four Airbus jets. Part of its plan to operate 15 aircraft by 2025, the three A320neos and one A321neo will arrive from the fall of 2022 through the spring of 2023. Play will use the jets to expand its Reykjavík hub to more destinations in both Europe and North America.
  • Startup Northern Pacific Airways, which plans to operate flights between North America and East Asia over Anchorage, now has aircraft. Or, it will. The company said it has acquired five Boeing 757-200s as part of its initial fleet plan. The first aircraft will join the fleet immediately, the carrier said. Northern Pacific is part of Float Alaska, which also runs Ravn.

Edward Russell & Madhu Unnikrishnan

Expand Section