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.

All Nippon Airways and JAL International of Japan, Emirates and Singapore Airlines among the largest customers in terms of value of planes.

Boeing Chief Executive Jim McNerney recently said he expects some of the foreign carriers to come back for more, adding to Boeing's backlog.

Boeing, in particular, doesn't want to ramp up production to accommodate latecomers, and Airbus is preoccupied with problems on its mega-jumbo A380 and developing a new model to compete with Boeing's hot-selling 787.

For orders of any size, both manufacturers are quoting delivery dates that are years off. "Some of the carriers just don't realize how tight production has gotten," said John Leahy, chief commercial officer at Airbus.

Still, the big airlines are confident Boeing and Airbus would give them special consideration because of their size.

Jake Brace, United's chief financial officer, said he wishes United was on the Boeing 787 order book because that twin-aisle plane has the latest technology.

"The order book is full to 2012, and we are not on that list," he said. "But we think if we were ready to place a significant order, somehow we could find planes, even without a production increase."

Mel Fauscett, Delta's managing director of fleet planning and aircraft acquisition, says Delta and some other airlines have options they could exercise to get in line for new planes, and that the manufacturers might also be willing to rev up production to win big U.S. orders.

Moreover, "a lot of the airplanes ordered by emerging countries will never be delivered or built," he predicted. "Airlines are buying them for runways that haven't been built."

American, the world's largest carrier by traffic, has the most pressing need. Its 300 MD-80 jetliners in service are 17 years old on average, guzzle 20 percent more fuel than new 737s and lack audiovisual gear to entertain passengers.

They account for nearly half of American's 697-plane mainline fleet and are the workhorse of its domestic operations.

Late last year, American's parent acknowledged that one of its most significant challenges is devising a near-term plan to replace the MD-80s. The company said in its annual report, filed Friday, that it is considering replacing some of its older planes before 2013, but that its recent losses, heavy debt and poor credit rating may make it difficult to get financing.

Swapping those jets for Boeing 737s, assuming the airline could get that many, would cost nearly $10 billion.

United, the No. 2 airline, has somewhat more breathing room, having used a stay in bankruptcy court to restructure its fleet. Its oldest planes, 94 vintage 737s, won't start turning 25 years old until 2011, though 67 of them will hit that milestone by 2015.

"If we ordered today, we'd be putting in orders for old technology," said Brace, the United CFO. For now, he said, United's priority is strengthening its balance sheet.

Once Boeing and Airbus come up with new-generation models, United wants "to be right there at the front of the line" to place orders, he said.

Delta, which aims to emerge from bankruptcy-court protection in about two months, is shuffling jets around as it tries to shift more of its service to international markets, where competition isn't as fierce.

To reduce its capital commitments, Delta, which has 440 mainline jets that are 12 years old on average, has been selling Boeing delivery positions to aircraft-leasing companies.

Delta's Fauscett says his airline, with Boeing's blessing, has sold rights to 48 737s it had on order. Meanwhile, it has placed orders for 10 smaller 737s and is taking over the leases on 13 American 757s.

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