Delta’s hidden profit center is repairing jet engines
Delta Airlines (DAL), the world’s largest airline by revenue and market cap, makes most of its money by shuffling a high number of passengers across the globe.
However a growing part of the business is its Delta TechOps unit, which is an MRO (Maintenance, Repair, and Overhaul) provider that does everything from routine maintenance to large jet-engine overhaul and even complex cabin interior upgrades.
In Delta’s 2022 annual results released last month, Delta’s “ancillary businesses” revenue line item (which includes TechOps) hit $846 million, with the vast majority of that revenue coming from TechOps.
While that is slightly lower than pre-pandemic levels, Delta is anticipating more growth in 2023 in its operations and doubling down on its TechOps business, opening a new jet engine repair facility in Atlanta with partner Pratt & Whitney.
Delta says the facility will be dedicated to performing maintenance on Pratt & Whitney GTF engines, which power Delta’s new fleet of advanced Airbus A321neo and A220 planes.
“It's a great day at Delta TechOps as we open this new engine shop,” said John Laughter, Delta’s chief of operations, in an interview with Yahoo Finance. “This is the continuation of our TechOps team’s advancement into the next generation engine platforms, [and] it matches well with our fleet.”
The new engine shop will not only service GTF engines belonging to Delta aircraft, but also customer engines that Delta maintains through its TechOps MRO business. It’s another way Delta can pad its bottom line, with revenues coming directly from its competitors to boot.
“This is another revenue stream for Delta,” Laughter says, adding that TechOps is an offering Delta’s “been investing in for more than 20 years; growing our third party capability.”
While Laughter declined to mention margins, he did note the MRO business is particularly good because it involves high-tech repairs being worked on by specialized technicians, and services work at this level requires time and investment. Which all translates into Delta charging hefty fees for work done.
Laughter says the new facility will do more than 10% of Delta TechOps’ GTF engine overhauls in the first year, and will expand to 400 GTF engine overhauls annually when it gets to full capacity.
And that is just the beginning. Soon TechOps will not only be able to service Pratt & Whitney’s GTF engines, but also Rolls-Royce (RR.L) Trent and CFM LEAP (GE) jet engines as well - leaving Delta’s TechOps in an enviable position.
“These are the new, efficient, quiet, fuel savings next step in sustainability engines, and Delta is going to be the only shop in North America that can handle all three of those platforms,” Laughter said.
Pras Subramanian is a reporter for Yahoo Finance. You can follow him on Twitter and on Instagram.
Click here for the latest trending stock tickers of the Yahoo Finance platform
Click here for the latest stock market news and in-depth analysis, including events that move stocks
Read the latest financial and business news from Yahoo Finance
Download the Yahoo Finance app for Apple or Android
Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, LinkedIn, and YouTube