Delta Air Lines exec: Jet engine servicing center ‘is another revenue stream’
Delta Air Lines EVP and Chief of Operations John Laughter joins Yahoo Finance Live to discuss teaming up with Whitney & Pratt on a jet engine servicing center, growing third-party capabilities, revenue growth, and the outlook for Delta Air Lines.
Video Transcript
[AUDIO LOGO]
BRAD SMITH: Delta Airlines is celebrating the opening of a new repair shop in Atlanta, Georgia for Pratt & Whitney GTF engines that powers Delta's fleet of jets and those belonging to its maintenance, repair, and overhaul customers. Here to discuss this latest investment to bolster the Delta infrastructure and resource is John Laughter, who is the Delta Airlines executive Vice President and Chief of Operations.
We've also got for the conversation along with us Yahoo Finance's Pras Subramanian. Gentlemen, thanks so much for taking the time here with us on the day. John, just to kick things off here into this partnership and what really led to this, especially as you look through the fleet that Delta operates right now.
JOHN LAUGHTER: Well, first of all, thanks for having us here today. It's a great day at Delta Tech Ops as we open this new engine shop. And this is just the continuation of our tech ops teams' advancement into the next-generation engine platforms. So it matches well with our fleet. It powers our newest A321neo airplanes, as well as our A220 aircraft. But it's also gives us another chance to show the world what we're capable of doing for over 100 airlines around the world.
PRAS SUBRAMANIAN: Hey, John, Pras here. So not only is it going to service Delta planes, but also other customers, other airlines. And it's sort of an additional revenue stream for the companies, isn't that right?
JOHN LAUGHTER: That that's absolutely correct. It's something that we have been investing in for more than 20 years, is growing our third-party capability. And so you're exactly right, this is another revenue stream for Delta.
BRAD SMITH: What type of contribution to revenue do you believe that this will be, John?
JOHN LAUGHTER: Well, you know, I'm really not prepared to talk about that today. What I am prepared to say is that this is an engine shop that will do more than 10% in this first year of the engine overhauls on the GTF engine. And we'll have the capability to expand to well-over 400 engines a year when we get up to full capacity.
PRAS SUBRAMANIAN: Hey, John, for the MRO business-- I mean, in terms of what Brad was talking about-- what are kind of the margins we're talking about in terms of servicing? Is it much higher than say usual operations with flights?
JOHN LAUGHTER: The margins, is that what you're asking about?
PRAS SUBRAMANIAN: Yes, correct. Correct.
JOHN LAUGHTER: Yeah, you know, MRO-- the MRO business is good. You know, and particularly when you have a group of people, like I'm fortunate enough to work with here, that are the high tech-- developing high-tech repairs, working with the technicians on the next level of repair that we can do to engines, engineers investing in time and developing repairs. And that's what really makes this a good business to be part of.
BRAD SMITH: And when you speak about that time and making sure that the repairs are done so swiftly and getting these aircrafts back into the fleet and into the skies, as well, what type of turnover is this going to really kind of-- you know, I didn't want to say, what's the Delta around this turnover [CHUCKLES] from previous operations to now? But what is that change? What's the net change as a result of this investment?
JOHN LAUGHTER: Well, there's no doubt that, you know, one of the benefits to us being in this business is improving the reliability of our own fleet. So again, having the high-tech workforce that we do that is involved in turning these engines-- there's two things that you do.
One is through process. You get them off wing, repaired and overhauled, and back on wing faster. Meaning, you need you need to own less additional spare assets. And then also the ability to develop high-tech repairs. And so both of those things together are what really increases or separates us from others.
PRAS SUBRAMANIAN: Hey, John, so just looking at it from your point of view. Operations standpoint from 2020-- for this year versus, let's say, prepandemic, how are things looking? Or is the business still kind of growing? Or is it bigger than what it was before we had the pandemic?
JOHN LAUGHTER: Yeah, so, I mean, overall, you know well the story at Delta and the airline industry. And so the entire industry took a small step back as we entered the pandemic, just with uncertainty. But that rebounded very quickly starting in 2021. And then we saw 2022 continue to build, as people put their aircraft-- or airlines put their aircraft back into service, including Delta. And so I think it's really back on-- you know, back up to the level that we saw it prepandemic. And continues to grow.
BRAD SMITH: And when you think about the number of planes that are part of that operation right now, if there was a percentage of planes where you're looking to see some of that churn as you're moving into some of the delivery of new orders that you've already placed-- and a lot of the industry has been tracking some of those orders that have been made, either into Airbus or into Boeing, especially over the past two years. You know, what is that percentage of planes that you see being sunset, those that are going to be serviced, and then those that are anticipated to be taken on and infused to the operation?
JOHN LAUGHTER: You know, I'm not sure I can give you the exact numbers or percentage. What I'll tell you is Delta Tech Ops is going to be uniquely positioned. There are three next-generation engine platforms. So one is the Pratt & Whitney GTF engine that we're celebrating today. Delta is also in the Rolls-Royce Trent engine. And we will soon be in the CFM International Leap engine.
And those three platforms are really what the future deliveries are about. These are the new, efficient, quiet, fuel-efficient, fuel savings, next step in sustainability engines. And Delta is gonna be the only shop in North America that can handle all three of those platforms.
BRAD SMITH: Delta Airlines EVP and Chief of Operations John Laughter, alongside Yahoo Finance's Pras Subramanian. And John, look forward to hearing more from you and the team around this advancement. I appreciate the time this morning.
JOHN LAUGHTER: Thanks so much for having me.
