U.S. Airlines May Be Left Behind in Updating Fleets

If the airlines don't start buying soon, many of their planes will be nearing 25 years old. But, production at Boeing and Airbus is largely sold out until 2011.

The nation's biggest airlines, back on firmer financial ground after a five-year slump, are eager to start replacing their aging fleets, but they face some major obstacles.

Among their biggest challenges: finding enough new planes to meet their needs, figuring out a way to pay for them and deciding how long they can afford to wait in line for delivery.

If they don't succeed, the consequences could mean more delays for air travelers.

During the slump that began in 2001, the major U.S. carriers sat on the sidelines, focusing on cost-cutting, while their foreign rivals went on a buying spree.

Now, production at Boeing and Airbus, the world's leading aircraft makers, is largely sold out until 2011.

Moreover, the biggest potential aircraft buyers in the U.S. American Airlines, United Airlines and Delta Air Lines would prefer "new generation" single-aisle planes that Boeing and Airbus haven't even designed yet, rather than derivatives of 737s and A320s that have been available for decades.

Another potential hitch: With their balance sheets battered by years of financial crisis, the big airlines aren't in a position yet to commit billions of dollars to buying planes over the next few years.

But if they don't start buying soon, many of their planes will be nearing 25 years old, the point where it typically makes more economic sense to replace them than to keep them.

Though those older planes can still fly safely, they develop more mechanical problems that can lead to flight delays and cancellations. They also tend to have noisier engines and lack passenger entertainment systems.

According to a recent analysis by Boeing, U.S. airlines will face an avalanche of aging airplanes beginning in 2012 if they don't start ordering this year and next for planes that would be delivered between 2009 and 2011.

The analysis supplied by Airclaims shows that major U.S. airlines now have a total of 126 airplanes that are 25 to 40 years old. Without new orders, that number is expected to grow to 384 airplanes by 2012, and as many as 840 by 2015.

To avoid piling on a mountain of debt all at once, U.S. airlines need to start replacing planes soon and in a steady but growing stream.

Otherwise they risk having both high debt and an elderly fleet as they try to manage the complicated task of integrating vast numbers of new planes.

American, United and Delta are pressing Boeing and Airbus to step up development of newer, more fuel-efficient aircraft, but those new models might not be ready until 2014 or beyond.

"We want to be very thoughtful about what is coming next before we order too many of the current generation," Tom Horton, American's chief financial officer, said at an investors conference in December.

However, neither Boeing nor Airbus sees a big leap in fuel efficiency or other new technology on the horizon that would justify the investment needed to produce successors to their 737 and A320 models, which are still selling well. Boeing last year won a record 739 orders for the venerable 737, a sign the model still has several years of life in the market.

By delaying their orders until new-generation aircraft were available, the big U.S. airlines would be taking a big risk.

In the years they were largely absent from the market, airlines in Asia, the Middle East and India have gobbled most available production slots for both single-aisle planes favored on domestic routes and twin-aisle planes used for long-haul flights.

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