Deliveries stretch and retirements speed up amid warnings that worst is yet to come
The steep fall in high-yield traffic is pushing US airlines into capacity cutbacks that may foreshadow more sweeping cuts if the economy stays sluggish.
Majors are stretching out deliveries, accelerating retirements and, in some cases, earmarking candidates for further retirements if the slump worsens. "I am not sure that we have seen the bottom of the trough yet," says consultant Robert Agnew of Morten Beyer & Agnew. "Some of the carriers may have to act again as they take on the new airliners that they are committed to."
Airlines have been caught unaware by the rapidity of the fall-off. United Airlines' chief financial officer Doug Hacker, says: "None of us has ever seen this type of collapse in the travel business."
United will cut capacity by 1% in the fourth quarter, when it had earlier planned to grow by 4%. For the full year, capacity growth will be just 0.5% instead of the planned 1.9%. "Clearly, we need to put a focus heavily on the cost side [instead of the revenue side]," says United president Rono Dutta. The airline plans to accelerate retirement of its 75 Boeing 727s and has "stretched out" delivery of 18 aircraft, mostly Airbus narrowbodies set for 2003. The airline will have no deliveries after 2003.
At US Airways, capacity will shift in the fourth quarter from a planned 5% to a 1% year-on-year increase, slowing full-year growth from a planned 7.2% to 4.5%, president and chief executive Rakesh Gangwal told analysts.
The airline will retire its last seven McDonnell Douglas DC-9s by the end of August and cut its Boeing MD-80 fleet by 10 by year-end, when it will also have retired more Boeing 737-200s, bringing its total fleet down to 408 aircraft from 423 in the second quarter.
Delta Air Lines will retire nine 737-300s in addition to the seven 727s and three unspecified aircraft it planned to take out of service from later this year. The airline's capacity growth will be flat, says chief financial officer Michelle Burns.
Cuts by Northwest Airlines on international routes will lead to a 1% drop in system-wide capacity for the rest of this year and a 3% drop in the first half of next year.
At Continental Airlines, which posted a rare profit among the majors, capacity will grow by 4% for the full year, down from the 6% planned. The carrier will retire the last of its McDonnell Douglas DC-10s by May and could retire 20 of its 737-300s and 13 of its MD-80s if required, president Lawrence Kellner has told analysts. America West is to return seven 737-300s over the next nine months.
American Airlines will not exercise options on 737-800s in 2002/03 and has already said it will speed retirement of 22 aircraft from TWA's fleet, with 19 DC-9s going by the first quarter of 2002 instead of over three years as planned.
Source: Flight International
