Flush with cash after several quarters of solid profits, the U.S. airline industry is in the midst of an aircraft buying spree, replacing old planes that are making some flyers anxious.
Just a month ago, United Airlines put in a $2.5 billion order for wide-body jets from Boeing Co. A week later, the carrier ordered 24 smaller jetliners valued at about $900 million from European consortium Airbus Industrie.
Trans World Airlines Inc. recently ordered 20 new Boeing aircraft and 25 jets from McDonnell Douglas Corp. Earlier this month, Federal Express Corp. ordered 11 new jets from Airbus at a cost of about $1 billion.
Several other U.S. airlines have recently ordered new aircraft, and industry analysts expect that most of those who have not yet done so are likely to join the buying binge soon. European and Asian airlines also are acquiring new aircraft in record numbers.
“There has been a lot of pent-up demand among the airlines for the last couple of years for new aircraft,” says Aaron Hollander, a principal of First Equity Development Inc., a Stamford, Conn.-based investment bank that specializes in the aviation industry.
“Now that their balance sheets are back in order after years of red ink, and interest rates and fuel prices are low again, the airlines are in a buying mood,” Hollander said.
Moreover, the strong demand for new aircraft is likely to continue for at least two or three years, Hollander added.
In fact, at the current rate of orders, Boeing anticipates it will have to boost its monthly production for all types of airplanes to 36 aircraft by early 1998 and perhaps 46 or more by 1999, from the current 19.
That means by the turn of the century, the Seattle-based manufacturer, the world’s largest aircraft maker, could be producing a record of more than 500 airplanes a year.
Currently, Boeing reports more than 330 airplanes on its order books.
Boeing’s biggest competitor, Airbus, also is experiencing a bonanza of new business. So far this year, it has received more than $20 billion in orders, triple the figure for all of 1995. Airbus now has orders for more than 230 airplanes on its books.
Even St. Louis-based McDonnell Douglas, a distant third to Boeing and Airbus in aircraft manufacturing, is experiencing a boost. German airline Lufthansa earlier this month placed a $550 million order for five of McDonnell Douglas’ MD-11 cargo jets.
What’s prompting U.S. and foreign airlines to buy new aircraft is not so much a desire to expand the size of their fleets, but rather to replace their increasingly aging aircraft, analysts point out.
For example, United, a subsidiary of UAL Corp. based in Elk Grove Township, has announced it intends to buy 97 new aircraft over the next five years. All but four of them will be used to replace aircraft in its fleet that are 20 years of age or older.
The airlines would have begun replacing their older airplanes six or seven years ago, the analysts note, but during the early 1990s the Persian Gulf war and a lingering worldwide recession plunged the airline industry into a financial funk. As a result, most carriers were up to their wingtips in red ink and were forced to shelve plans to add significant numbers of new planes.
The freeze on new orders, however, pushed the average age of America’s commercial airline fleet well beyond single digits. Hundreds of America’s jetliners today are not just old, “they’re downright ancient,” said an executive at a major U.S. airline who requested anonymity.
In fact, the average age of the combined fleets of the nation’s major carriers is fast approaching 14 years, according to a recent report by Raymond E. Neidl, an analyst for New York investment firm Furman Selz. That’s up from an average of 12 years in 1990 when concerns about the age of U.S. aircraft already were being raised.
In 1985, the average age of all airplanes operated by major carriers was 10.5 years, and in 1975 it was 7.5 years.
Worse yet, about 3,000 commercial jets in use in the U.S.–about 25 percent of the total fleet–are at least 20 years old.
For most major airlines, the impetus for replacing older aircraft is an economic one. Older airplanes are a drain on their bottom lines. They cost more to maintain. They are less fuel-efficient than the newer planes being made, and they are generally smaller and, therefore, carry fewer paying passengers than most newer models. In addition, their technology is outdated, so they are less attractive to passengers and more difficult for flight crews to operate.
For consumers, on the other hand, the aging fleets raise concerns about their airworthiness, a concern that was heightened when a 27-year-old ValuJet plane plunged into the Florida Everglades in May, killing all 110 people on board.
More recently, a 17-year-old plane flown by TWA, whose fleet of nearly 200 aircraft is the oldest of any major U.S. passenger carrier–the average age of its planes is 19.8 years–dropped part of a wing flap over a New York neighborhood.
And last month, engine parts tumbled from an older Delta Air Lines Inc. aircraft after takeoff from New York’s LaGuardia Airport.
The age of an aircraft has little, if anything, to do with its airworthiness, according to executives of the major airlines as well as safety experts and federal regulators. What matters, they say, is how an aircraft is maintained.
“It’s kind of like an old car,” said Russell Duncan, a retired Northwest Airlines pilot who speaks out on aviation safety issues. “If you take good care of it, you can drive it for years.”
Executives of major airlines point out that each airplane in their fleet undergoes a series of rigorous maintenance checks on a scheduled basis, including a complete overhaul every five or six years, during which virtually every section of the airplane is fitted with new parts.
“During a complete overhaul, we tear everything out of an airplane and replace just about every part,” said Ted Dewing, an executive at United Airlines’ aircraft maintenance center in San Francisco.
“The aircraft is subjected to 12 to 14 consecutive days of around-the-clock maintenance. In the end, you have what amounts to a brand new airplane even though it may have been in service for several years.”
In fact, said Thomas Trotter, a spokesman for the International Association of Machinists, the union that represents most airline mechanics, after an old airplane undergoes one of its periodic complete overhauls, “the only thing on it that’s old is the serial number.”
Moreover, most major carriers subject their older aircraft to more frequent and intense maintenance checks to make sure they are airworthy.
“At United, we’re more aggressive in terms of maintenance on our Boeing 727 aircraft, for example, than we are on our newer Boeing 757 jets,” Dewing said.
United’s 727 fleet is 17.4 years old on average, while its 757s average only 5 years of age.
Indeed, the major airlines spend huge amounts on aircraft maintenance. AMR Corp.’s American Airlines, United’s chief rival, spends more than $1 billion a year just on routine maintenance, despite the fact that its planes overall are the newest in the airline business, averaging only 9.2 years in age.
The major carriers also are constantly upgrading their maintenance facilities. A couple of years ago, American completed a $600 million capital program to upgrade and expand its principal maintenance center in Tulsa, Okla., and build a major maintenance facility near its Ft. Worth headquarters.
United, whose fleet has an average age of 11.6 years, recently built a maintenance facility in Indianapolis to complement its maintenance center in San Francisco.
But despite these measures and the airlines’ well-publicized arguments that older aircraft are just as safe, if not safer, than newer airplanes, many travelers remain skeptical.
Whenever a commercial airplane crashes or something goes wrong with its gear, forcing it to land early, the question of the aircraft’s age will, no doubt, continue to be prominent in the public’s mind.
And the age issue is likely to continue to be of particular concern to many of those who book flights on ValuJet, Northwest Airlines Corp., TWA and Kiwi International Airlines, whose fleets are among the oldest in the nation.
Discount carrier ValuJet, which has been grounded by the Federal Aviation Administration since June as a result of the crash in the Everglades, has a fleet with an average age of 26.4 years. Northwest’s fleet averages 19.1 years; TWA’s 19.8 years; and Kiwi’s 22.8 years.
The next oldest fleet belongs to Continental Airlines Inc., at an average age of 13.9 years.
Passengers concerned about aging aircraft might consider Southwest Airlines Co.
The low-fare carrier–whose safety record and financial success over its 25 years in business are the envy of all of its competitors–has the youngest fleet among the major passenger carriers. The average age of its airplanes is 8.3 years.
