US airlines bide their time as fleet needs grow
Tue Jun 12, 2007 12:09 PM ET
By Kyle Peterson
CHICAGO, June 12 (Reuters) - Freshly restructured and more-or-less on the mend, U.S. airlines are balancing their need for newer, more fuel-efficient planes with the need to place expensive orders at the optimal time.
For years, experts have said the time is at hand for a flood of U.S. orders. Those orders have yet to materialize, however, as carriers wait for financial stability and a more modern narrow-body plane.
When new orders start to flow, they may flow fast. And airlines probably will start to place more orders over the "next couple of years," said Tom Horton, chief financial officer at AMR Corp. <AMR.N>, parent of American Airlines.
"I think this industry needs to be very careful about allocating further capital until they can prove they can get a return on that capital," said Horton, who makes the fleet decisions for the world's largest airline.
In March, American said it would pull forward deliveries of 47 Boeing 737-800 aircraft. The order marks the start of American's replacement of its fleet of 300 MD-80s. The MD-80 aircraft is no longer manufactured and it uses more fuel than modern planes of comparable size.
Other carriers also have begun to show an interest in aircraft orders, especially as they recover from a years-long slump triggered by terror concerns and low-fare competition.
During that period of steep cost cutting -- when carriers such as UAL Corp's <UAUA.O> United Airlines, Delta Air Lines <DAL.N> and Northwest Airlines <NWA.N> restructured in bankruptcy -- fuel prices skyrocketed.
Airlines became acutely aware of the need to conserve fuel. But their financial positions were often too rickety to order more fuel-efficient planes.
