MAX KINGSLEY-JONES / LONDON
Scrap dealers are set to move in as the number of airliners in desert ‘boneyards' exceeds 2,000
The surge in the number of aircraft entering storage since 11 September has seen the world's idle jet fleet spiral up to a record 2,000 aircraft.
This sudden growth in the idle fleet is no surprise, as many airlines were forced to dump excess capacity after the sudden fall in passenger traffic following the terrorist attacks. While it is normal for the stored fleet to balloon as an economic slump bites, this situation promises to be quite different from earlier cycles.
Firstly, at almost 13%, the tally of stored aircraft that has accumulated already represents a greater percentage of the entire jet fleet than the last slowdown in 1991-1994 after the Gulf War. Secondly, analysts expect far less of the idle fleet to be restored to flying duties as the next recovery begins than last time. Instead, wholesale scrapping looks likely.
According to data compiled from the Airclaims CASE database, after falling to a low of around 700 units during the boom period of the mid-1990s, the idle jet fleet has been running at around 1,100 aircraft for the last couple of years. During the growth period, the idle fleet represented around 6% of the fleet, while in the last recession the 1,100 stored aircraft were around 10% of the fleet.
As air travel growth began slowing during the early part of last year, the idle fleet rose to a record 1,200 aircraft. Following the collapse in passenger traffic after 11 September a further 950 jets have been put into storage, pushing the idle fleet up to 2,076 aircraft. Fifty-eight percent (551 units) of the aircraft parked in the last four months were with North American operators, while European carriers accounted for 26% (244 units) of the total.
As expected, the US airlines head the list of carriers that have parked aircraft since 11 September. United Airlines, which has put over 100 aircraft in to storage in the past four months, is at the top and also has the largest idle fleet. US Airways has parked almost 80 aircraft while American, Continental and Delta have each parked 40-50 aircraft.
Although most of these aircraft are older generation, hushkitted narrowbodies and first generation widebodies, a significant number are more modern types. The Boeing 727, 737-200 and McDonnell Douglas DC-9 have taken the brunt of the surge in stored aircraft, with their idle fleets equating to 40% of the total. Significantly, the relatively young Airbus A320 and Boeing 737 Classic (-300/400/500) have been grounded in large numbers since 11 September, with 75 and 90 aircraft entering storage, respectively. Non-existent demand
The sudden explosion in aircraft supply against almost non-existent demand has seen aircraft values tumble, says Edward Pieniazek, director consultancy and information services at UK analysts Airclaims. "The universal trend is for market values to have fallen by 10-50%."
Pieniazek says that the 10% drop applies to a current generation narrowbody such as the Airbus A320, while the 50% fall relates to younger, previous generation widebodies such as the Boeing 747-200.
UK aviation consultant IBA Group warns that although there was some sales activity at the end of 2001, the aircraft leasing business faces a real challenge in 2002: "The next 12 months will see the return off-lease of nearly 400 modern airliners including Boeing and Airbus narrowbodies, BAe 146, Fokker 70/100 and [Boeing]MD-83s." IBA adds that while some these airframes will be accounted for by lease extensions and repossessions, "it will be a buyers'/lessees' market with this number readily available. All the major lessors are exposed, with GE Capital Aviation Services and International Lease Finance each faced with some 50 aircraft coming off lease."
IBA says the availability of modern generation aircraft has already had an impact on lease rentals, with "industry talk" of 737-800s being offered at rates similar to the older generation 737-300 - at less than $190,000 a month. The rate that an Airbus A320 can command has been knocked down to similar levels.
Old hit hardest
With older types being hit so hard, the temptation might be for owners to wait for the economic recovery to begin and an improvement in values, but this is unlikely and many older types are not expected to fly again. Airclaims thinks it is important for the industry's recovery that older airliners in storage never carry passengers again. In the last downturn many retired aircraft were kept "mothballed" but "the rationale for keeping aircraft in this status pending a return to service is not as solid this time," says Pieniazek.
During the last industry recovery 10 years ago, many of the old, low-value 727s, 737s and DC-9s discarded by the US majors came back to haunt them. Low-cost start-ups, with little prospect of a long-term existence, used the aircraft to take on their previous operators, delaying the industry's return to financial health.
A good example of this was no-frills carrier ValuJet (now AirTran Airways), which launched in 1992 with ex-Delta Airlines DC-9s from the fleet's old Atlanta hub and provided a thorn in the side of the US major, stealing a chunk of its business.
Boeing vice president Randy Baseler points out that the "real" idle fleet is higher than the 2,000 aircraft stored. "Airlines haven't just cut capacity by parking aircraft, they have also reduced utilisation of their active fleets by, say, 20%," he says. Every five aircraft that are flying 20% lower hours equate to another idle aircraft.
For the last couple of years, around 180 jets have been permanently withdrawn from service (ie broken up) each year. Since the early 1990s an increasing proportion of these have been first generation widebodies. Additionally around 40-60 aircraft leave the passenger fleet each year for new lives as freighters.
The availability of cheap, young passenger aircraft for conversion to freighters should help speed up the modernisation of the world's ageing air cargo fleet. New freighter conversion programmes for the Airbus A300-600, 737 Classic, 757 and 767 will provide modern replacements for the 727F and McDonnell Douglas DC-8F, when that market begins to recover.
Source: Flight International
