Delta Air Lines (NYSE: DAL) announced Thursday that it plans to permanently retire its 18 twin-aisle Boeing 777s by the end of the year and write off $1.4 billion to $1.7 billion in the second quarter after determining that the airplanes, as well as its remaining MD-90s that are going to a boneyard, have no recoverable value.
Meanwhile, cargo demand is making possible the introduction of three new passenger flights per week from Atlanta and Detroit to Frankfurt, Germany, and London, respectively, beginning May 21. The Frankfurt service will be operated using an Airbus A330-300 aircraft with 31 tons of cargo capacity, while a Boeing 767-300 will fly to Heathrow with 26 tons of cargo capacity, Delta said.
Airlines cut most of their schedules to the bone, especially for international routes, after the coronavirus led to widespread lockdowns. With few people on board, the flights are not economical to operate. Instead, Delta and its rivals have responded to huge interest from shippers to move goods and vital medical supplies by turning passenger aircraft into temporary freighters. Now, Delta says it can supplement passenger service with high-paying cargo to justify the flights.
Delta said it is also launching scheduled auxiliary cargo flights between New York and Mumbai, India, starting Saturday, subject to foreign government approval.
The Atlanta-based carrier said in a regulatory filing the decision to retire the 777s will save money by downsizing the fleet to match lower travel demand and substituting more modern, fuel-efficient aircraft. Delta, the largest carrier in the world in terms of revenue, will rely on the Airbus A330 and A350 instead of the 777s for long-haul flights. The A350-900s that will directly replace the 777s burn 21% less fuel per seat.
The 777s are busy right now as temporary freighters ferrying cargo from China and Korea to Atlanta and Los Angeles every day, part of an industrywide tactic to repurpose passenger aircraft to serve shippers and logistics companies in need of air transport. The 777s have also flown trips from Chicago and Los Angeles to Frankfurt to deliver mail to U.S. troops and carried thousands of citizens back home on special harvesting charters for people stranded overseas when coronavirus travel restrictions kicked in.
Last month, Delta officials announced during an earnings call with analysts plans to accelerate the retirement of MD-88 and MD-90 jets to June. They also raised the possibility of eliminating Boeing 757s and 767s from the fleet but did not mention the 777s.
In a Thursday memo to employees, CEO Ed Bastian said culling the fleet is a necessary move to help stop heavy losses stemming from the virtual shutdown of passenger travel associated with the coronavirus pandemic.
“Delta is currently burning about $50 million every day, and steps like this help us stem the bleeding, in an effort to safeguard Delta jobs and our future. Delta went into this crisis in a position of strength, and this will be an important step to ensure we remain in a relatively strong industry position as demand recovers.
“Retiring a fleet as iconic as the 777 is not an easy decision — I know it has a direct impact on many of you who fly, crew and service these jets,” he said. “The 777 has played an important role with Delta since 1999, allowing us to open new long-haul markets and grow our international network as we transformed into a global airline.”
The long-range 777-200 variants arrived at Delta in 2008 and can fly nonstop on routes such as Atlanta to Johannesburg and Los Angeles to Sydney.
Other cost savings are coming from reduced fuel and maintenance expenses, reductions in purchasing and vendor contracts, reduced labor hours, and voluntary, unpaid leave taken by 41,000 employees. Delta has also borrowed heavily and accepted $5.4 billion in payroll protection assistance from the U.S. government.
During the crisis, Delta has parked 650 aircraft.
In addition to lost revenue because of fewer flights, Delta has refunded customers $1.2 billion since the pandemic began.