Older planes soaking up sun in U.S. desert
FEATURE-Older planes soaking up sun in U.S. desert
Sun May 14, 2006 11:31 AM ET
By John Crawley
WASHINGTON, May 14 (Reuters) - Most of the 2,000 jets parked by airlines and other aircraft owners in the western U.S. desert have no chance of flying, especially with high fuel prices demanding efficiency, experts say.
The conclusion departs from the historic practice of remarketing a range of older passenger planes. It is also a less obvious illustration of how energy costs, fierce competition and airline financial troubles are reshaping the industry.
"Old planes continue to sit there," said John Walsh, a Maryland-based aerospace industry consultant.
Roughly 2,000 aircraft from U.S. and international airlines are idled at a handful of desert facilities in New Mexico, California and Arizona. That is down sharply from the storage highs after the Sept. 11, 2001, attacks, which depressed travel demand and prompted carriers to slash fleets.
Airlines, leasing companies and other investors would in the past "park" aircraft during a downturn and fly them when business rebounded. Or when they parted with a reliable jetliner, the plane would be refurbished and sold.
Commercial airliners are mostly made of aluminum and the dry climate wards off corrosion.
AIRLINES HURTING
In the first years after the attacks, airlines brought back some planes, and other newer models that were parked due to bankruptcies at US Airways Group Inc. <LCC.N> and other domestic airlines were sold overseas.
But financial pressures, an overall industry shift toward the low-cost business model with more precise routing, and oil topping $70 per barrel have made older workhorse planes less desirable.
"Pretty much anything that's worth an airline flying is out there flying," Boeing spokeswoman Vicki Ray said.
Airlines want planes that are not only fuel stingy, but take fewer people to operate and require less maintenance.
"In our judgment, given fuel prices and production of new aircraft, we feel that at best 350 aircraft may find new homes if demand remains strong," Henry Hubschman, chief executive of General Electric Co. <GE.N> Commercial Aviation Services unit, told industry leaders recently in Washington. GE is not one of the companies that own the parked planes.
Most are owned by airlines, leasing companies, banks and other institutions who may never fully recoup their investment.
Many older planes can be ready on short notice. "They're well maintained and can fly forever," said Paul Worthington, director of marketing for Evergreen Air Center, a big storage and maintenance facility in Marana, Arizona.
But high operating expenses are keeping them grounded. Overcapacity has also diminished value. Some are idled hours before they are due for expensive scheduled maintenance.
Parked older aircraft include L-1011s, DC 9s and MD-80s, 737s, 767s, and 747s, according to consultants and interests like Jet Information Services Inc., which tracks aircraft and publishes the World Jet Inventory.
Unwanted planes today have an average age of 18 to 25 years and have three or four engines. Their value run into the millions. Engines are generally worth more than the aircraft.
BOEING, AIRBUS MAKE DEALS
In a growing number of cases, those desert aircraft owners cannot turn away deals that Boeing Co. <BA.N> or its European rival Airbus <EAD.PA> offer for new planes, Worthington and others said.
New ones are more efficient to operate and guarantee a honeymoon from big maintenance. A new Boeing 737-800 costs about $70 million. The lowest price for the yet-to-fly 787 "Dreamliner" -- promoted as uniquely fuel efficient -- is under $140 million, Boeing figures show. Airlines lease planes.
Foreign airlines, especially start-ups, are historically a popular destination for remarketed jets. But they are also making deals with manufacturers. "They're not cash-strapped. Most of them are buying new planes," Walsh said.
Hubschman said GE has a strong outlook on freighter conversions and has transformed more than 55 older 737, 767 and 747 passenger planes. UAL Corp.'s <UAUA.O> United Airlines is in the process of selling some older planes, including two DC10-30 freighters, a spokeswoman said.
Hubschman believes the replacement to more efficient cargo models will accelerate if fuel prices stay high. But if overall costs do not decline, Worthington may face new candidates for the scrap heap -- some sooner than expected.
"We've always scrapped 20 to 50 a year," he said. "But what we're seeing now are newer planes being taken out, their parts recycled and sold and (the plane) eventually cut up."
