Delta’s Boeing 777s were not supposed to be retired so early.
Only last year Delta finished a $100 million upgrade on the 777 to install new suites with doors in business class, introduce a premium economy cabin and place mood lighting through the plane, an interior meant to last for eight years or longer. Instead the 777s will exit Delta’s fleet by the end of this year.
The early retirement comes at a cost. Delta expects to book a $1.4 billion-$1.7 billion non-cash impairment for the 18 777s and 27 MD-90s it will also retire. Delta is shrinking in response to COVID-19 tapering passenger demand and growing the airline’s debt.
Delta's refurbished 777 included new seats with doors in business class
The 777 has not been a core part of Delta’s fleet the way it is at American Airlines and United Airlines, which have over 60 777s each.
Delta inherited around 30 A330s from its merger with Northwest. Since 2017 Delta has built-up a fleet of 13 A350s, which have around 21% lower seat costs than the older 777s. Delta has more A350s on order and last year agreed to take 14 A350s from partner LATAM.
Unlike Delta, American and United also acquired the more modern and efficient 777-300ER. Having a newer variant can incentivize American and United to keep some of their older 777-200s since pilots and some parts can be pooled across the types.
About half of Delta’s 777 fleet is still relatively young, likely driving the impairment cost although Delta did not state a breakdown.
Delta installed a premium economy cabin on the 777s
Ten of the 18 777s are -200LR models that average 11 years old. That is only mid-life for a widebody aircraft. Delta’s oldest widebody, the 767-300ER, averages almost 24 years – and Delta has 56 of them.
The remaining eight 777s are -200ERs that average 20 years old, but which Delta would have surely kept flying given their recent interior update.
Delta's refurbished 777
The impairment cost is high since Delta owns all 18 777s. Direct ownership gives it flexibility to determine retirement compared to leasing an aircraft and waiting for the contract to end or paying an early return fee.
Delta also owns all 27 MD-90s, but these average almost 23 years and are smaller aircraft, likely contributing much less to the impairment. The MD-90s will exit by the end of June, alongside Delta’s MD-88s.
The impairment charges will be in Delta’s second quarter. It also expects a future “immaterial” cash expenditure related to the impairment.
