August 10, 2011 / 3:05 PM / 8 years ago

UPDATE 3-Delta sticks to 200 aircraft order in 2011 -- CEO

* Plans to buy 200 narrow-bodies in 2011 still in place

* No replacement of wide-bodies seen in near future

* Delta buying 3.5 pct of Mexican carrier AeroMexico (Rewrites; adds comments by Delta, bylines; updates quotes)

By Cyntia Barrera Diaz and Veronica Gomez Sparrowe

MEXICO CITY, Aug 10 (Reuters) - Delta Air Lines Inc (DAL.N) plans to go ahead with orders for up to 200 aircraft to replace older narrow-body models, despite growing fears of recession in the United States and a wider global economic downturn.

“We have not changed our plans,” Chief Executive Richard Anderson said on Wednesday during a news conference in Mexico City to announce Delta’s purchase of a 3.5 percent stake in Mexican carrier AeroMexico (AEROMEX.MX).

Delta will make a decision on the new order in the third or fourth quarter of this year, Anderson said, adding the company is looking at all aircraft manufacturers.

“It comes down to performance and economics,” he added.

Brazil’s Embraer (EMBR3.SA)(ERJ.N), the market leader in the regional jet market, said at the Paris Air Show in June that it saw “good chances” for orders from Delta. [ID:nN1E75J0PJ]

Asked what he thought about Boeing Co’s (BA.N) revamped 737 model, Anderson said it is a “very competitive product,” but declined say if Delta was planning to purchase the aircraft.

Boeing’s sales were hit in the first half by uncertainty over its strategy for the 737 medium-haul jet, which competes with a similar aircraft made by European company Airbus. [ID:nLDE7740KS]

Delta, the No. 2 in the industry behind United Continental Holdings Inc UAL.N, has no immediate plans to replace its existing fleet of 170 wide-body jets — mostly used for very long flights. The planes have an average age of 12 years and an estimated useful life of 30 years, Anderson said.

As for Delta’s fuel hedging strategy in the face of declining oil prices, Anderson said Delta’s program has worked well so far, resulting in millions of dollars in gains, and it has no plans to change.

“It the next six months, our goal is to hedge about 50 percent of our requirements to reduce volatility. It is a rolling 50 percent for the next six to 12 months ahead,” Anderson said.


Delta is the sole U.S. company with a stake in the Mexican industry, which now consists of just three carriers — AeroMexico, Interjet and Volaris — after rival Mexicana ceased operations last year due to heavy debt and labor burdens.

Delta is paying 31 pesos per AeroMexico share, or around $65 million for the stake, said Andres Conesa, chief executive of AeroMexico.

AeroMexico, which went public in April, gained many passengers following the demise of Mexicana.

The agreement builds on an existing commercial alliance between the airlines and will link Delta’s network more closely to Mexico. As part of the deal, Delta will take a seat on the AeroMexico board, the companies said.

AeroMexico shares were down 2.29 percent at 23.05 pesos in local trading in Mexico. Delta shares were down 5 percent to $6.73 in afternoon trading in New York. (Editing by John Wallace and Andre Grenon)

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