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Fleet Renewal, Why Not In The US?  
User currently offlineKL911 From Czech Republic, joined Jul 2003, 5141 posts, RR: 15
Posted (5 years 1 month 2 weeks 6 days 11 hours ago) and read 7090 times:

This has been bothering me for a long time. In Europe carriers have a much younger fleet then in the US, why is that?

The way I see it is that the older the plane becomes the more maintenance costs it has, and more fuel guzzling it is compared to newer models. A 15 year old plane can still be sold to another operator in less developed countries, but a 30 year old plane has no value at all.

Plus, the older the plane, the more chance of metal fatigue right? And probably other dangerous factors.

Is it just mentality, or a money thing?

KL911

34 replies: All unread, showing first 25:
 
User currently offlineViscount724 From Switzerland, joined Oct 2006, 25372 posts, RR: 22
Reply 1, posted (5 years 1 month 2 weeks 6 days 11 hours ago) and read 7067 times:



Quoting KL911 (Thread starter):
Is it just mentality, or a money thing?

It's a money thing. Most major US carriers haven't been able to afford to invest billions in massive fleet renewal.


User currently offlineKL911 From Czech Republic, joined Jul 2003, 5141 posts, RR: 15
Reply 2, posted (5 years 1 month 2 weeks 6 days 11 hours ago) and read 7046 times:



Quoting Viscount724 (Reply 1):
It's a money thing. Most major US carriers haven't been able to afford to invest billions in massive fleet renewal.

But how about leasing? And if it's a money thing, how can they still pay the maintenance on those old birds?


User currently offlineChicagoFlyer From United States of America, joined Jan 2006, 272 posts, RR: 0
Reply 3, posted (5 years 1 month 2 weeks 6 days 10 hours ago) and read 6971 times:

There are several factors here that I can think of...

1) Obviously the money factor. Any renewal trades increased maintenance cost and fuel inefficiency against the expense of buying the shiny new aircraft. Some fleets hold up better than others in this regard (DC-9s anyone?)

1a) Holding the relative economics of new vs old aircraft constant, there's also the issue of the cost of capital. This has been rising sky-high for US airlines (with capital providers being weary of recent bankruptcies)--where a 10% rate of return on investment might have been great some time back, 15-20% may now be requried--making it more difficult to justify replacement

2) The market dynamics. The US market has not been growing well in recent times for a variety of reasons... so last year the industry as a whole decided that a good solution may be fewer aircraft rather than newer aircraft. Also, European deregulation into a common market (and the associate growth) came later than the N. American.

3) The "replacement" candidates are the legacies who have been shrinking; the LCCs have been growing but starting off with new planes which are not yet replacement candidates...

4) The fact that most aircraft are bought new. It's like we do not have an East Europe-type market whose carriers would have Soviet or second-hand Western aircraft (thus needed to be replaced earlier)


User currently offlineEXAAUADL From , joined Dec 1969, posts, RR:
Reply 4, posted (5 years 1 month 2 weeks 6 days 10 hours ago) and read 6976 times:



Quoting KL911 (Thread starter):
In Europe carriers have a much younger fleet then in the US, why is that?

US carriers have no $$$$$$$$$$$$$$$$$


User currently onlineHAL From United States of America, joined Jan 2002, 2561 posts, RR: 53
Reply 5, posted (5 years 1 month 2 weeks 6 days 10 hours ago) and read 6932 times:



Quoting KL911 (Reply 2):
But how about leasing? And if it's a money thing, how can they still pay the maintenance on those old birds?

Whether leasing or buying, it's the payments for the aircraft that are by far the largest expense of owning (not operating) an aircraft. With older aircraft that are paid for - or that cost much less to buy - the maintenance is still a much lower cost than ownership, even if the plane is older and requires more work every day.

HAL



One smooth landing is skill. Two in a row is luck. Three in a row and someone is lying.
User currently offlineLetsgetwet From United States of America, joined Jul 2005, 609 posts, RR: 0
Reply 6, posted (5 years 1 month 2 weeks 6 days 10 hours ago) and read 6933 times:

I think the average age of CO's fleet can compete with any of the Euro carriers.

User currently offlinePPVRA From Brazil, joined Nov 2004, 8964 posts, RR: 40
Reply 7, posted (5 years 1 month 2 weeks 6 days 10 hours ago) and read 6903 times:

They've bought quite a few aircraft in the past 20 years, especially regional jets. These tend to be operated by independent airlines for the larger ones and might not show up in the calculation of the average age of the fleets for AA or DL.


"If goods do not cross borders, soldiers will" - Frederic Bastiat
User currently offlineRFields5421 From United States of America, joined Jul 2007, 7607 posts, RR: 32
Reply 8, posted (5 years 1 month 2 weeks 6 days 10 hours ago) and read 6870 times:



Quoting KL911 (Thread starter):
The way I see it is that the older the plane becomes the more maintenance costs it has, and more fuel guzzling it is compared to newer models. A 15 year old plane can still be sold to another operator in less developed countries, but a 30 year old plane has no value at all.

Plus, the older the plane, the more chance of metal fatigue right? And probably other dangerous factors.

Is it just mentality, or a money thing?

There are many factors. The B787 delays have slowed some US fleet replacments, but other reasons also apply.

I don't know the details, but the US laws on depreciation and those of some other nations are very different. The depreciation schedule on an aircraft can make fuel and maintenance costs a minor consideration.

No, it is not that the US carriers has no money. Several have plenty money and do have active fleet replacement programs. Size is part of the problem.

American Airlines has more new aircraft coming into their fleet than Lufthansa, but their fleet is a bit over twice the size of LH. Put 100 new aircraft into LH over three years, and you will see a new aircraft on every second or third flight.

Put 100 new aircraft into AA over three years, and you will see a new aircraft about one flgiht in six.

Southwest Airlines has as many aircraft as Air France and Lufthansa combined. They plan to replace most of their B737-300 aircraft in the next few years with newer planes.

As also noted above - the secondary market is quite good in eastern Europe and western Asia. The European carriers are much better at staying in touch with potential lease and resale customers and responding to meet their needs for fairly new aircraft.


User currently offlineLAXintl From United States of America, joined May 2000, 25436 posts, RR: 49
Reply 9, posted (5 years 1 month 2 weeks 6 days 10 hours ago) and read 6825 times:

Its important to also note the significant differences in US and foreign accounting practices and tax policy will very much effect the business case and decision making process for aircraft acquisition.

For instance, in countries like Singapore with very short depreciation periods for capital assets, it basically penalizes the operator who obviously wants to continue having the ability to continue earning benefits of depreciation and likely seeks out new assets. On the other hand in the US, tax policy dictates that it is often advantageous to hang onto and gain the full depreciation value of an asset, so there is less rush to replace it.

Additionally the manner which impaired assets can be revalued and recognized over time and their tax implications often also encourage US airlines to possibly maintain older fleets.

Ultimately, every business will revolve around cost/benefit analysis. The point will come when new vs old, or purchased vs lease will each have their own benefits.
Majority of todays US major airlines are run by financial types, so certainly they very much in tune with what is the most beneficial for their respective organizations.



From the desert to the sea, to all of Southern California
User currently offlineCommavia From United States of America, joined Apr 2005, 11641 posts, RR: 61
Reply 10, posted (5 years 1 month 2 weeks 6 days 10 hours ago) and read 6820 times:

The biggest reason that U.S. airlines chronically under-invest in new aircraft (relative to major carriers in other countries) is that U.S. airlines are chronically under-invested in.

The airline industry, no matter what country it's in, is an immensely capital-intensive business - indeed one of the most capital-intensive in the world. There are massive amounts of upfront investment required, and most of it creates fixed costs that are completely unavoidable and uncorrelated with the unit revenue of an additional marginal customer.

In the United States, the domestic airline industry has suffered from years of chronic under-investment for several reasons. Hyper-competition - to an extent that, at least in my opinion, is existent in virtually no other air travel market in the world - has dramatically lowered the barriers to entry into the industry, and outmoded bankruptcy laws have dramatically lowered the barriers to exit out of the industry. This has created a scenario where, for at least the last decade, there have always been more available seats than the market - overall, not speaking about one airline specifically - could profitably support.

In addition, U.S. carriers by and large are plagued by legacy labor costs - driven by union-dominated labor - that has not responded rapidly or proportionally to adjustments in economic reality and market conditions. Changes in highly-fixed labor costs have not in any way kept up with changes in unit revenue, and created a massive timing dislocation where revenue rises and falls, and either way, labor costs almost never change, or when they do, don't change as much, or change too late to make much of a difference.

So, what this means - in practical terms - is that legacy U.S. carriers have, generally speaking, never been able to get ahead of the capital curve. There have been some short periods of stability when some airlines have been able to make huge capital investments in new airplanes, facilities, growth, etc. - the mid 1980s and late 1990s come to mind. But beyond that - and certainly without question sine 9/11 - U.S. airlines have been stuck in this vicious spiraling cycle where they take one step forward and two steps back.

They have not been able to catch a break, and not been able to get ahead of the rate of growth in their own debt. Between 9/11, Afghanistan, Iraq, SARS, oil prices, global recession, etc. - they have constantly had to issue more and more debt just to stay afloat, and during the brief periods when they turn minuscule profits, it all has to go towards paying down the last batch of debt so they can prepare for the next batch. There has, by and large, not been enough free cash flow (or even productive assets left to mortgage) in order to finance any sort of new capital investment like terminals or airplanes.

Again - this is generalizing - and you have seen some investment in both facilities and planes - but, relatively speaking, compared with the rest of the world, and other periods in the history of the industry, not much.


User currently offlineTWA902fly From United States of America, joined Dec 1999, 3128 posts, RR: 4
Reply 11, posted (5 years 1 month 2 weeks 6 days 10 hours ago) and read 6753 times:

Just wanted to do a comparison... this is all according to airfleets.net (which can be off sometimes, i understand)

USA

United 13.5 years
Delta 13.9 years
American 15.6 years
Southwest 14.0 years
Northwest 12.6 years
Continental 9.6 years

Europe

British Airways 11.4 years
Lufthansa 13.1 years
Air France 9.3 years
KLM 10.1 years
Swiss 10.2 years
Iberia 7.1 years
Virgin Atlantic 8.0 years
SAS 12.0 years

from this sampling (and i do not mean to sway results, just picked the large airlines off the top of my head)... the oldest fleet is AA's (obviously due to their hundreds of MD-80s)

While yes European Airlines seem to have younger fleets, they are not younger by much... the biggest gap being between Iberia and American, and even then it is only an 8 year difference, shorter than the production time for most generations of mainline aircraft. Also I see no correlation between safety, profitibality and fleet age. Southwest, which has been for the most part profitable has a higher than average fleet age and a better than average safety record.

One reason for the older fleets could be that airlines in the US have generally larger fleets. For instance by the time American retires and replaces their MD-80s with 737-800s... the oldest 737-800 will be way past 10 years old.

just my two cents.

'902



life wasn't worth the balance, or the crumpled paper it was written on
User currently offlineCommavia From United States of America, joined Apr 2005, 11641 posts, RR: 61
Reply 12, posted (5 years 1 month 2 weeks 6 days 10 hours ago) and read 6740 times:



Quoting TWA902fly (Reply 11):
by the time American retires and replaces their MD-80s with 737-800s... the oldest 737-800 will be way past 10 years old.

The oldest AA 737 is already ten years old! (Incidentally, AA's newest MD80s - the last ever delivered to TWA - are newer than AA's oldest 737s.)

It's going to probably be another ten years before the MD80s are gone.

By the time AA gets done replacing the MD80s, it will be time to replace the 737s!


User currently offlineIkramerica From United States of America, joined May 2005, 21532 posts, RR: 60
Reply 13, posted (5 years 1 month 2 weeks 6 days 9 hours ago) and read 6685 times:



Quoting KL911 (Thread starter):
This has been bothering me for a long time. In Europe carriers have a much younger fleet then in the US, why is that?

Is this supported with facts? I guess it depends on how one defines "much".

There aren't any US airlines that hold on to the bulk of their planes for 30 years. Particular fleet subtypes are an exception, such as the DC9s at DL or the 762s at AA. But otherwise, 20 years is really the max, and as soon as economics warrant it (either by replacement in good times or route trimming in bad times), those old planes go bye-bye.

Airlines like AF and IB just went through a renewal period, and where AF is concerned, won't be taking new planes for a while, so their fleet will age.

AA, on the other hand, has held off on new planes due to money and union troubles, but will go through a large capital program in the not to distant future which will drop their fleet age by at least 3 years. The retiring of the A300s alone and MD80s being phased out will do quite a bit to decrease the age.

CO's fleet is due to get a lot younger on average as the 733s leave by Q2 next year, replaced with 738 and 739ER. They should drop under 9.



Of all the things to worry about... the Wookie has no pants.
User currently offlineDocLightning From United States of America, joined Nov 2005, 19734 posts, RR: 59
Reply 14, posted (5 years 1 month 2 weeks 6 days 9 hours ago) and read 6643 times:



Quoting Viscount724 (Reply 1):

It's a money thing. Most major US carriers haven't been able to afford to invest billions in massive fleet renewal.

When your fleet is 500 aircraft, you are constantly buying new A/C.

Quoting TWA902fly (Reply 11):

It's a money thing. Most major US carriers haven't been able to afford to invest billions in massive fleet renewal.

Another thing is that there haven't been any new types in a while. If 787's were taking off at your local airport, we wouldn't be having this conversation. US carriers are buying new widebodies (777's and A330's) and new narrowbodies. AA has new 787's on order and has a bunch of shiny 777's flying all over. They also have 73G's and will probably be ordering more. And although we think of all Mad Dogs as being "old," some were delivered relatively recently.

It's also a matter of hiccups in fleet planning. Since renewal is a continuous process, it might just be a moment where quiet cycles all got synchronized.

In 10 years, UA will probably have one of the youngest fleets in the world.


User currently offlinePar13del From Bahamas, joined Dec 2005, 7233 posts, RR: 8
Reply 15, posted (5 years 1 month 2 weeks 6 days 8 hours ago) and read 6550 times:

There is another way to look at the numbers, what number of a/c in Europe are "young" as in the absolute number, then see how many a/c are of similar age in the US, I think the numnber may show something. As a percentage EU fleets are younger but the US market has many more a/c, yes NW/DL has the DC-9's but ther are probably just as many new / young a/c in the US the percentage is just off.

User currently offlineDocLightning From United States of America, joined Nov 2005, 19734 posts, RR: 59
Reply 16, posted (5 years 1 month 2 weeks 6 days 8 hours ago) and read 6517 times:

Oh, I forgot to mention, CO has 787's on order, as does DL. As these aircraft replace 767's DL's fleet age will drop. And once they merge with NW, that number will probably go down by a whole year once the -9's are gone.

Quoting Ikramerica (Reply 13):

AA, on the other hand, has held off on new planes due to money and union troubles, but will go through a large capital program in the not to distant future which will drop their fleet age by at least 3 years. The retiring of the A300s alone and MD80s being phased out will do quite a bit to decrease the age.

Are the Mad Dogs paid for? I wonder if they might become the next NW -9. Douglas built 'em well.


User currently offlineCommavia From United States of America, joined Apr 2005, 11641 posts, RR: 61
Reply 17, posted (5 years 1 month 2 weeks 6 days 8 hours ago) and read 6490 times:



Quoting DocLightning (Reply 16):
Are the Mad Dogs paid for?

The majority of them are bought and paid for - long ago - yes. However, many of the owned aircraft are the older(est) ones, which are likely to be among the first to go. Some of the newer nAAtive planes and many (if not most) of the ex-TWA planes are leased.

Quoting DocLightning (Reply 16):
I wonder if they might become the next NW -9.

I doubt AA will keep them that long. At one point (maybe still), NW was operating DC-9s that were nearing 40 years old. Even AA's oldest MD-80 is not even close to that age, and by the time all 80+ of these brand new 737s are delivered, I imagine that AA's remaining MD-80 fleet (of around 150 aircraft) will consist almost entirely of the newest nAAtive and ex-TWA models.

Quoting DocLightning (Reply 16):
Douglas built 'em well.

That they did. They made exceptional airplanes - as evidenced by the number of DC-10s, DC-9s/MD-80s, and even DC-3s still flying around the world today in a wide range of passenger and cargo functions.


User currently offlineIkramerica From United States of America, joined May 2005, 21532 posts, RR: 60
Reply 18, posted (5 years 1 month 2 weeks 6 days 8 hours ago) and read 6484 times:



Quoting DocLightning (Reply 16):
Are the Mad Dogs paid for? I wonder if they might become the next NW -9. Douglas built 'em well.

Many will stay, but many more will go away, some being replaced with 738s.

There's also a possibility of replacing 757s with 739ERs (just rumor), and retiring 762s altogether (using displaced 763 or 757s for the transcons).

And there's the 787 order that can't be finished until the union deal is settled, but which have been talked about by AA.

Combine all that with the retiring of the A300s, and you get a newer fleet on average, though the longer it takes to do all that, the older the entire remaining fleet gets.



Of all the things to worry about... the Wookie has no pants.
User currently offlineKL911 From Czech Republic, joined Jul 2003, 5141 posts, RR: 15
Reply 19, posted (5 years 1 month 2 weeks 6 days 8 hours ago) and read 6467 times:



Quoting Commavia (Reply 17):
That they did. They made exceptional airplanes - as evidenced by the number of DC-10s, DC-9s/MD-80s, and even DC-3s still flying around the world today in a wide range of passenger and cargo functions.

And DC-2! The famous 'Uiver' is still flying around Holland, and will visit AMS somewhere this or next week, together with a Catalina..


User currently offlinePPVRA From Brazil, joined Nov 2004, 8964 posts, RR: 40
Reply 20, posted (5 years 1 month 2 weeks 6 days 7 hours ago) and read 6378 times:



Quoting TWA902fly (Reply 11):
USA

United 13.5 years
Delta 13.9 years
American 15.6 years
Southwest 14.0 years
Northwest 12.6 years
Continental 9.6 years

Europe

British Airways 11.4 years
Lufthansa 13.1 years
Air France 9.3 years
KLM 10.1 years
Swiss 10.2 years
Iberia 7.1 years
Virgin Atlantic 8.0 years
SAS 12.0 years

Just as an example, Comair's fleet is 9.7 years old (122 aircraft). LH Cityline is 9 years old (72 aircraft). You could probably shave-off a couple of years for both airlines if you include outsourced flying.



"If goods do not cross borders, soldiers will" - Frederic Bastiat
User currently offlineMiller22 From United States of America, joined Nov 2000, 718 posts, RR: 4
Reply 21, posted (5 years 1 month 2 weeks 5 days 21 hours ago) and read 6110 times:

What about fuel and noise taxes in Europe? Those will bring favor to newer aircraft economics.

This coupled with the depreciation differences changes the economic picture drastically. American carriers can still make money (well, lose less, anyway) with older aircraft because of the lower fuel and noise costs. Hence they stay.


User currently offlineSpacecadet From United States of America, joined Sep 2001, 3629 posts, RR: 12
Reply 22, posted (5 years 1 month 2 weeks 5 days 17 hours ago) and read 5870 times:

Just to throw some Asian carriers into the mix:

fleet age for

JAL: 11.3 yrs.
ANA: 10.5 yrs.
Singapore: 6.3 yrs.
Asiana: 7.9 yrs.
Cathay: 10.6 yrs.
Air India: 11.9 yrs.
Korean Air: 9.7 yrs.
China Airlines: 6.8 yrs.

American fleets are definitely older, on average, although not in all cases. I will point out that JAL's fleet age is heavily skewed by the JAS merger and all those old A300's and MD-80's (plus their own 747's that are currently being replaced), but then a lot of American carriers' fleet ages are skewed by mergers too. Delta's fleet age would definitely be a couple years younger without those DC-9's in there.



I'm tired of being a wanna-be league bowler. I wanna be a league bowler!
User currently offlineSsides From United States of America, joined Feb 2001, 4059 posts, RR: 21
Reply 23, posted (5 years 1 month 2 weeks 5 days 17 hours ago) and read 5831 times:



Quoting Commavia (Reply 10):

Commavia, thanks for one of the best and most thought-through posts I have read on this board.

You are absolutely correct -- in the US especially, the airlines are unique in the sense that they are both capital- and labor-intensive. Few industries are like that. This, combined with the different tax accounting rules in the US, leads to an older fleet.



"Lose" is not spelled with two o's!!!!
User currently offline1GR8AIRLINE From United States of America, joined Mar 2009, 21 posts, RR: 0
Reply 24, posted (5 years 1 month 2 weeks 5 days 16 hours ago) and read 5788 times:



Quoting Commavia (Reply 17):
However, many of the owned aircraft are the older(est) ones, which are likely to be among the first to go.

Not necessarily…Northwest frequently parked the aircraft next in line for heavy checks, regardless of it’s age relative to other airplanes in the fleet. This allowed them to avoid (or at least delay) maintenance expenses. As a result, you could have 1980s-vintage 757-200s still carrying passengers while new versions were (are) sitting in the desert.


25 DL752 : US carriers can probably pay for the maintenance because they already paid off the aircraft.
26 MogandoCI : I think it's less about average age but more about extreme cases. No matter how many brand new 333s or 77Ls you have, people see you in a different li
27 Jolau1701 : They are doing some plane shopping aren't they? Any word on them settling on anything yet? Odd, the only DC10s and MD11s I see go to the cargo side o
28 Voltage : I would be curious to see what the median age of the fleets are. Some fleets (NW) are more heavily skewed than others. Anyone know where to find those
29 United1 : RFPs for ~150 aircraft to replace the 744/763 and the oldest 752 were due by the end of last month supposedly and UA said that they will make a decis
30 DL767captain : I've always thought a big part of this was the fact that the US has no major flag carrier. There is British Airways, Lufthansa, Air France, KLM, all o
31 AirNz : A large market share of what? Most certainly not within the UK or Europe. Why is Afghanistan and Iraq a reason for them to be issuing more debt just
32 777STL : Not at all. Less competition doesn't insure profitability. There are plenty of nations out there with "one flag carrier" that aren't profitable. BA b
33 Par13del : How large is the US market compared to individual countries in Europe versus the entire EU? If the combined EU market can support more than one major
34 Pylon101 : Traveling to US a lot, spending a lot of time in D.C. area (Eastern corridor) I would say that the business model "frequency over capicity" is going t
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