U.S. Scope Clause ‘Relief’ a Double-Edged Sword
Scope clause revisions at Delta Air Lines and elsewhere in the U.S. could spell relief for regional jet manufacturers such as Bombardier and Embraer, both of whose commercial aircraft businesses have suffered through a long period of sluggish sales in North America and now face the likely prospect of an extended slump in recession-plagued Europe. But the proposed new scope clauses, particularly at Delta, would result in the grounding of hundreds of 50-seat regional jets, undoubtedly driving down their values to new depths and, in the end, cutting total capacity among the airline’s regional affiliates.
The tentative Delta contract, details of which the airline’s Air Line Pilots Association master executive council (MEC) released to AIN last week, would allow Delta Connection affiliates to add seventy 76-seat jets to their fleets, increasing the total number of what the airline calls larger, two-class regional jets from 255 to 325. Delta Connection carriers now fly 153 seventy-six-seat jets and 102 seventy-seaters.
However, under the tentative deal, Delta would have to remove 218 fifty-seat jets from the Delta Connection network as part of what Delta calls a “capacity-neutral” plan that calls for the addition of as many as 88 Boeing 717s at the mainline. Delta has reached a so-called agreement in principle with Southwest Airlines and Boeing to lease the 88 Boeing 717s now in service with Southwest subsidiary AirTran Airways starting “as early as 2013.” Meanwhile, it continues to take delivery of used MD-90s, largely as replacements for retired DC-9s. Its fleet now consists of just 21 more DC-9s, all of which it would remove as the 717s arrive.
Now flying 343 fifty-seat RJs, the Delta Connection carriers must fly as many as 311 of the small jets through the end of 2015 under their current contracts. The new agreement with the Delta pilots would cut the number of 50-seaters to 125. It would also cap the number of 70-seat jets at 102—the number Delta Connection carriers now operate. Meanwhile, for every new 76-seat jet added to the regional network, Delta must add 1.25 narrowbody jets to its own network. According to a Delta MEC official, if Delta opts to add all 88 Boeing 717s to its fleet, Delta Connection carriers will see a net decrease of 5,580 seats due to the reduction in fifty-seat flying and the mainline would see an increase of 9,680 seats.