Cash-poor U.S. airlines may face huge plane bill

As aircraft age, replacements may be hard to come by

US Airways officials went to the Paris Air Show last month and did something executives at most big U.S. carriers haven't done in years. They ordered planes: 92 new Airbuses at an estimated cost of $10 billion.

After a brutal half-decade in which the USA's airlines rang up $35 billion in losses, they're again profitable. But, US Airways' order notwithstanding, the little money they're making isn't nearly enough to cover what they'll need to rejuvenate and enlarge their fleets in the next two decades.

If projections by the plane-making giants, Airbus and Boeing, are to be believed, U.S. airlines could need as many as 9,000 new jets in the next 20 years. That could cost the industry nearly $1 trillion.

The high cost of fleet replacement and expansion will add to the financial pressures that already weigh heavily on the airlines, including the pressure to raise fares. But failure to launch the enormously expensive process soon could relegate the big U.S. carriers to flying antiquated aircraft for years while their foreign and low-cost domestic competitors fly newer, more fuel-efficient jets.

The planes flown by the USA's six largest conventional network carriers are now, on average, 13.3 years old, according to industry tracker Back Aviation Solutions. That's the oldest ever for this group of airlines.

"The situation with these very old planes is starting to get serious," says Michael Roach, a veteran consultant who co-founded America West Airlines in the 1980s. If the big U.S. carriers that haven't resumed buying planes don't do so soon, "they may never get out of the hole they're in."

Roach notes also that U.S. carriers have never operated their planes more intensively, getting more hours of flight out of them and packing more people into them than ever before. Their planes are, in the vernacular of the cowboy, being "rode hard and put up wet."

Yet, with only a couple of exceptions, the big U.S. airlines are still financially hamstrung by the huge losses of the post-9/11 era.

Airline executives acknowledge they face a daunting, but not insurmountable, task.

"It's a multiyear process,'' says Tom Horton, CFO at American, the world's largest carrier. "It took us five bad years to get where we were; it'll take awhile for us to get back on firm footing."

Among the big carriers, Northwest Airlines has the oldest fleet as measured by average age: 18 years, according to the company. Continental has the youngest by that measure: nine years.

Good maintenance can keep planes flying safely for 30 years or more, but after a point, the upkeep is more expensive than buying new ones, says Randy Baseler, who earlier this year retired as Boeing's chief airplane salesman. The big U.S. airlines, he says, "are starting to get themselves in a bind. If they don't start taking deliveries now, they're never going to get caught up. They could end up with an even larger fleet that needs replacement in an even more desperate way."

Had Baseler not stayed so busy selling Boeing airplanes to foreign airlines in the years before his retirement, his argument that U.S. airlines are falling behind could be dismissed as an empty sales pitch.

But all those foreign sales in recent years are pushing the U.S. carriers further back in the delivery line when they do get around to placing orders.

Twenty years ago, U.S. carriers could be counted on to absorb nearly half the world's commercial aircraft production. That gave them preferred customer status. Today, Boeing and Airbus expect U.S. carriers to buy a quarter to a third of their future output, giving them less clout with the plane makers.

Wall Street expects U.S. airlines this year to register a second year of profitability since the post-9/11 industry crash: $6 billion before taxes, interest and accounting items. But that pales in the face of the estimated $715 billion to $950 billion worth of new planes that the manufacturers estimate U.S. carriers will need to replace and enlarge their fleets to meet travel demand. The government forecasts that the number of air travelers in the USA will double in the next two decades.

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