Return to Profit at Major U.S. Airlines Good News for Boeing, Airbus

As Boeing and its chief rival, Airbus, dueled over commercial airliner orders last week at the Farnborough International Airshow in England, noticeably absent from the fray were the familiar heavy hitters of the airline world.

The world's major airlines, such as United, American, Delta, British, Lufthansa, Aeroflot and Air France, yielded the spotlight to little-known carriers, including Hungary's Wizz Air, Germany's Blue Wings, India's Go Air and Spain's Futura.

It's airlines such as these -- the start-ups, the low-cost carriers -- that propelled Boeing and Airbus to set order records last year and to sell what usually amounts to a year's worth of orders in a little more than six months this year.

The lack of major airline orders is a direct reflection of those airlines' hitherto perilous financial condition. United and Delta have filed for bankruptcy. American and British have undergone major restructurings. And Air France and Lufthansa are under attack by European low-fare carriers such as EasyJet and Ryan Air.

But that's all about to change, which could bode well for Boeing and Airbus.

For the first time since the Sept. 11, 2001, terrorist attacks rocked the airline business, most major carriers report profitable quarters. Last week, American reported second-quarter earnings of $291 million.

Another major U.S. carrier, Continental Airlines, reported earnings of $198 million. More earnings announcements are due next week. JetBlue Airways and SeaTac-based Alaska Air Group are expected to announce profits.

Investment firm Merrill Lynch predicts U.S. airlines will announce second-quarter profits totaling $1.2 billion.

Those major carriers are the potential source for hundreds of orders for new aircraft from both of the major manufacturers once they stabilize their finances.

These carriers, as well as Minneapolis-based Northwest, can hardly afford not to order more fuel-efficient planes, lest they fall victim to high fuel prices. Many of their planes are old and guzzle high-priced jet fuel at prodigious rates.

Take Northwest Airlines, for instance. The airline has 161 McDonnell Douglas DC-9s in its fleet, the oldest of which is nearly 40 years old. The youngest of the airline's DC-9s is 31 years old. Delta's fleet is newer, but it includes 22 first-generation Boeing 737-200s with an average age of nearly 21 years and 10 wide-bodied Boeing 767-200s that average nearly 23 years old.

At United, the airline has five 767-200s in its fleet with an average age of 22.9 years old. Its four 767-200ERS are almost 23.5 years old.

American's fleet includes dozens of MD-80s from the '80s.

Those mainline carriers have taken patchwork measures to improve the efficiency of their fleets. American, for example, just ordered 104 sets of AviationPartners/Boeing blended wingtips to retrofit its 757 fleet. The airline previously ordered blended wingtip extensions for its 737-800s. The upwardly curved wingtip extensions improve takeoff performance, lessen the aircraft's noise profile and, most importantly, save fuel by reducing drag. The airline also this summer grounded more than two dozen of its fuel-guzzling MD80 aircraft.

Northwest, along with Continental Airlines, has ordered Boeing's superefficient 787 Dreamliner. Boeing claims that plane, to enter service in 2008, will save at least 20 percent in fuel over similar-sized older-generation jets, such as the DC-10, 767 and A300.

American Airlines chief executive Gerard Arpey has said the airline won't rush out and buy new aircraft on the strength of one quarter's profits, but that the airline eventually will have to order next-generation aircraft.

Delta is deep into its bankruptcy reorganization, so it has given no hints at aircraft acquisitions. The carrier, however, is in better shape than others. Its fleet of 57 737-800s is just 5.33 years old on average, and its 21 767-400s is but five years old on average.

If fares continue to rise and aircraft remain nearly full, those major carriers could become serious customers for Boeing and Airbus, helping to prolong the order boom for another few years.

News stories provided by third parties are not edited by "Site Publication" staff. For suggestions and comments, please click the Contact link at the bottom of this page.