The deal came together because it allowed each airline to carry out its own strategy — Delta’s to keep discerning travelers happy by replacing smaller, aging planes, and Southwest’s to keep its fleet simple with lower costs and less complexity that can cause problems.
For Delta — newly confident with its recent profitability — the 717 subleasing deal comes as Delta invests $3 billion in improving its customers’ experience, after years of just focusing on survival through financial struggles during its 2005-2007 bankruptcy and subsequent recovery.
A key part of Delta’s strategy to improve the experience of flying is to replace aging, inefficient 50-seat regional jets that travelers dislike, putting in their place bigger planes like the 717s that are more fuel-efficient and offer amenities like wi-fi and first class.
The 717 deal is “a very positive thing” for Delta passengers, said Chris McGinnis, editor of The Ticket, a newsletter for Atlanta-based frequent travelers.
“Everyone groans when they hear that they’re going to be on a 50-seat [regional jet],” cramped with few amenities and no first class. “They say the overhead bins are like toaster ovens.”
Delta Connection at one point had about 600 of the 50-seat regional jets. In the 1990s they were seen as an upgrade from the noisier, slower turboprops they replaced on short routes, but airlines also plugged them into schedules on longer runs.
Now Delta is whittling the 50-seat fleet down to 100 or 125 planes over the next two years.
The 717 deal “was a great step in that,” said Glen Hauenstein, Delta’s executive vice president of network planning. He said a key goal is to eventually use the 50-seat regional jets only on routes averaging about 350 miles because longer flights can get more uncomfortable.
Other airlines such as American are buying new planes to replace older aircraft.
Delta says even though the 717s are coming secondhand, they are modern aircraft getting all-new interiors. The 717s were manufactured between 1998 and 2006.
And Delta is also buying new planes, including 180-seat Boeing 737-900s and 76-seat Canadair jets.
Airline consultant Robert W. Mann said the decline of the 50-seat jet is driven partly by airline mergers, which have cut the number of competitors and diminished the need to compete by offering more flights to more cities than rivals.
That trend has led to a loss of airline service in some small towns that had depended on airline service on small planes to connect to larger hubs.
For Dallas-based Southwest, the deal helps it maintain a long-held strategy to fly only Boeing 737s. The stubby, twin-engine jet is such a key part of Southwest’s identity that a weekly message for employees from Southwest chief executive Gary Kelly has been called the “737 Newsline.”
When Southwest announced in 2010 it was acquiring AirTran — which had both 737s and 717s — a big question was what would happen with the 717s.
Kelly later said keeping an all-737 fleet would improve efficiency. Having a simplified fleet allows a carrier to keep maintenance, training, flight scheduling and pilot staffing simpler, with lower costs.
That all made Southwest highly motivated to find a way to unload the 717s.
“We just amazingly found a home for all 88 of those aircraft,” Kelly said when the Delta sublease was announced.
As Mann noted, an airline would “rather just get rid of it, one-stop shopping, sell the whole line forward and wipe your hands of the entire situation.”
As part of the deal, Southwest agreed to repaint the planes for Delta and make other modifications.
“You might think of it as a volume discount that we were willing to offer to induce our sublease customer here to take those aircraft,” Kelly said.
Airlines often try to divest of airplanes into markets where the aircraft won’t be used to compete against them — often going overseas. But in this case each side had enough to gain to drive a deal.
“Everybody walked away thinking they won something,” Hauenstein said.
The first route for the Delta 717 starting in September will be Atlanta-Newark — a route the competition flies with smaller regional jets — and the second will be Atlanta-Little Rock.
By offering a better experience, “what we want is for people not to feel like they need to try and fly on our competition,” Hauenstein said. “That’s really where we’re trying to take the airline.”