Delta’s hidden profit center is jet engine repair

Delta Airlines (DAL), the world’s largest airline by revenue and market capitalization, makes most of its money by carrying large numbers of passengers across the globe.

A growing part of the business, however, is the Delta TechOps entity, a maintenance, repair, and overhaul (MRO) provider that performs everything from routine maintenance to overhauls of large jet engines to complex cabin interior upgrades.

In Delta’s 2022 full-year results released last month, Delta’s “ancillary businesses” (including TechOps) revenue position reached $846 million, with the majority of that revenue coming from TechOps.

While that’s slightly lower than before the pandemic, Delta expects to continue growing its operations and doubling its TechOps business in 2023 by opening a new jet engine repair facility in Atlanta with partner Pratt & Whitney.

Delta Air Lines Airbus A330neo or A330-900 with the European aircraft manufacturer’s Neo engine option on departure from Amsterdam Schiphol International Airport AMS EHAM. (Photo by Nicolas Economou/NurPhoto via Getty Images)

According to Delta, the facility will be dedicated to servicing Pratt & Whitney GTF engines that will power Delta’s new fleet of advanced Airbus A321neo and A220 aircraft.

“It’s a great day at Delta TechOps as we launch 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 progression into next-gen engine platforms, [and] it goes well with our fleet.”

The new engine shop will not only service GTF engines on Delta aircraft, but also customer engines that Delta services through its TechOps MRO business. It’s another way Delta can improve its bottom line, with revenue coming directly from its competitors.

“This is another revenue stream for Delta,” says Laughter, adding that TechOps is an offering that Delta “has been investing in for more than 20 years; Expanding our third-party capabilities.”

While Laughter declined to name margins, he noted that the MRO business is particularly good because they are high-tech repairs that specialized technicians work on, and service work at this level takes time and investment. Which all leads to Delta charging high fees for work done.

Laughter says the new facility will perform more than 10% of Delta TechOps’ GTF engine overhauls in its first year and will expand to 400 GTF engine overhauls per year when it reaches full capacity.

And that is just the beginning. Soon TechOps will not only be able to service Pratt & Whitney GTF engines, but also Rolls-Royce (RR.L) Trent and CFM LEAP (GE) engines – Delta’s TechOps are in an enviable position.

“These are the new, efficient, quiet and fuel-efficient next steps in sustainable engines, and Delta will be the only business in North America that can handle all three of these platforms,” ​​said Lacher.

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Pras Subramanian is a reporter for Yahoo Finance. you can follow him Twitter and further Instagram.

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