Airbus Faces Setback as Delta Reviews $14 Billion Jet Order

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Angry United Airlines customers can now vent their fury at a juicy target: the chief executive’s pocketbook 

United ties about $500,000 of CEO Oscar Munoz’s annual bonus to customer satisfaction questionnaires. The manhandling of a doctor dragged off an overbooked flight in Chicago– and Munoz’s response, widely viewed as ham-handed — doesn’t figure to help his cause.

Each day, United collects about 8,000 customer surveys on items such as legroom and the quality of in-flight coffee. Fliers were already pretty disgruntled. In 2016, researcher J.D. Power rated United dead last of traditional North American carriers. Early returns are now even less promising.
“United Airlines just sent me a customer survey about my flight yesterday,” Meredith Tucker deadpanned on Twitter after the overbooking episode. “Looking forward to sharing my thoughts.”
Of course, Munoz won’t be begging on street corners if he’s docked the half a million. The CEO has 2016 target compensation of about $14.3 million, according to his employment agreement. The actual amount for last year is expected to be disclosed by month’s end.
In a filing, the company’s board said executive pay is “designed to further our objective of aligning the interests of our employees with those of our stockholders and customers.” United declined to comment.
Southwest Airlines Co. also ties part of CEO Gary Kelly’s bonus to a measure of customer loyalty. Delta Air Lines Inc. links a part of CEO Ed Bastian’s annual long-term stock award to customer service.
At the airline officially known as United Continental Holdings Inc., the board mentions “customer satisfaction” in the pay filing no less than 20 times. The company didn’t specify exactly how that’s calculated, though the bonus is tied to improvement of the survey results.
Presumably, dragging customers out of their seats won’t help. A Twitter wag named Joe Householder wrote, under the hashtag, #awkward: “Based on experience, the guy on the #united flight is getting his, ‘tell us about your trip,” email survey about now.”
Another Twitter commentator said he actually received one, which asked, “According to you, why do we consider ourselves the best airline to fly with?”
His answer: “beats me.”

Airbus Faces Setback as Delta Reviews $14 Billion Jet Order

Airbus SE’s expansion into Boeing Co.’s home market faces a potential setback as Delta Air Lines Inc. reviews a $14 billion purchase of the European planemaker’s two newest wide-body models.
The Atlanta-based carrier, known as an influential and shrewd aircraft buyer, is studying its twin-aisle orders amid signs the long-range travel market is saturated, Ed Bastian, Delta’s chief executive officer, said during a quarterly earnings call Wednesday. While he didn’t name Airbus, Delta has no twin-aisle orders pending with Boeing, according to the U.S. company’s online database.
“We continue to see excess capacity in wide-bodies as we look to the future for the industry,” Bastian said, adding that Delta, which has orders for the Airbus A350 and A330neo, is in discussions with planemakers. “We continue to look internally as to what that means for Delta. You could anticipate some reductions, I think, broadly over the next several years.”
Word of the review intensifies concerns that demand for long-haul planes is weakening as a long jet-buying binge draws to close. American Airlines Group Inc. last year deferred its A350 order, while United Continental Holdings Inc. said it may swap its A350 purchase for smaller planes.
Wide-Body Worry
“It definitely contributes to what’s been a building caution, or wall of worry around the wide-body market,” said Ken Herbert, an aerospace analyst at Canaccord Genuity.
Airbus shares traded 0.6 percent lower at 71.51 euros as of 9:29 a.m. Thursday in Paris. They closed 0.9 percent higher Wednesday after Bastian’s remarks, paring earlier gains of as much as 1.5 percent. Boeing closed down 1.4 percent to $176.05, the second-biggest slide among the 30 members of the Dow Jones Industrial Average.
Airbus confirmed that it is in touch with Delta, while declining to go into detail.
“It’s not appropriate for us to comment on our customers’ internal analysis,” spokeswoman Mary Anne Greczyn said by email. “However, as a leading aircraft manufacturer, Airbus continually engages our customers around the world to help optimize their fleet needs.”
The Toulouse, France-based company out-dueled Boeing for Delta’s 50-jet order in 2014 and is slated to begin delivering the first of 25 A350s later this year. They’re intended to replace the Boeing 747 jumbos that once shuttled Delta’s passengers to Asia. The airline has also ordered 25 A330neos, a model that’s yet to fly, as a replacement for its oldest Boeing 767s.
The prospect of Delta postponing or canceling the wide-body order adds to uncertainty over Airbus’s efforts to make inroads in the U.S. with its next-generation models.
American last year delayed its A350 deliveries by an average 26 months and is due to take the first of 22 planes next year, spokesman Joshua Freed said. The planes were ordered by US Airways Group, which merged with American in 2013. United said last year it was reviewing its purchase of A350-1000s.
Delta, too, could defer orders to a schedule that better fits its demand forecasts, or shift the mix to other models, according to aviation consultant Scott Hamilton. The carrier may issue a request for proposals for single-aisle aircraft that would pit Boeing’s 737 Max against Airbus’s A321neo and will also need a mid-market planes, such as the lighter-weight regional A330 or the so-called 797 under consideration at Boeing, he said by email.
“At face value, the Delta statement might seem alarming,” Hamilton said. “But as so often becomes the case, the ‘review’ may not be what it seems.”
Sales of twin-aisle jets have slowed as the market absorbs a surplus after Boeing and Airbus boosted output at a 16 percent annual pace from 2011 through 2015, said Richard Aboulafia, an aerospace analyst at Teal Group. Late last year, Boeing announced a second cut to the production rate of its 777 jetliner amid a sales drought, while A330neo orders have stalled, he said.
In December, Delta scrapped a longstanding order for 18 Boeing 787 Dreamliners that it inherited in its 2008 merger with Northwest Airlines. The airline said then that the decision was consistent with the need “to prudently address our wide-body aircraft needs.”

Bloomerg