This article originally appeared on Seeking Alpha. Please view disclosures: https://seekingalpha.com/article/273990-aging-fleets-which-airline-has-the-highest-costs
With jet fuel once again on the rise and the economic environment becoming even more uncertain, it’s informative for airline stock speculators to know which carriers have the oldest fleets. The age (and model) of an aircraft could have large implications on fuel efficiency and ultimately the airline’s cost structure, which becomes absolutely paramount under poor economic conditions. Let’s evaluate the fleets of the Big Four legacy carriers in the U.S.
US Airways (LCC)
As of the end of last year, US Airways was flying nearly 60 Boeing 737 Classics and 10 legacy 767s that were on average about 21 years old. These Classics and legacy 767s are roughly 15%-20% less fuel efficient than the 737NG and 787 Dreamliner, the respective replacements offered by the commercial OEMs. The average age of US Airways’ mainline fleet is 12.3 years.
What is US Airways buying?
From its 10-K:
US Airways has definitive purchase agreements with Airbus for the acquisition of 134 aircraft, including 97 single-aisle A320 family aircraft and 37 widebody aircraft (comprised of 22 A350XWB aircraft and 15 A330-200 aircraft). Since 2008, when deliveries commenced under the purchase agreements, we have taken delivery of 34 aircraft through December 31, 2010, which includes four A320 aircraft, 23 A321 aircraft and seven A330-200 aircraft…US Airways plans to take delivery of 12 A320 family aircraft in each of 2011 and 2012, with the remaining 46 A320 family aircraft scheduled to be delivered between 2013 and 2015. In addition, US Airways plans to take delivery of the eight remaining A330-200 aircraft in 2013 and 2014. Deliveries of the 22 A350XWB aircraft are scheduled to begin in 2017 and extend through 2019.
AMR Corp (AMR)
AMR is still flying over 220 MD-80 aircraft that are roughly 20 years of age (ouch!), on average. The firm is also operating 15 767-200s that are 24 years old. The 737NG, which AMR does have in its fleet, and the 787 Dreamliner are significantly more fuel-efficient that these older planes. The average age of AMR’s mainline fleet is 15 years. The average age of airplanes in Eagle’s fleet, its regional carrier, is 10 years.
What is AMR buying?
From its 10-K:
As of December 31, 2010, American had 15 Boeing 737-800 purchase commitments for 2011 and 28 737-800 purchase commitments for 2012 and in addition to those commitments, American had firm commitments for eleven Boeing 737-800 aircraft and seven Boeing 777-200 aircraft scheduled to be delivered in 2013-2016…On January 14, 2011, the Company entered into an amendment…with Boeing to exercise rights to acquire two Boeing 777-300ER aircraft for delivery in 2012…In 2008, the Company entered into a new purchase agreement with Boeing for the acquisition of 42 firm Boeing 787-9 aircraft and purchase rights to acquire up to 58 additional B787 aircraft. The first aircraft is currently scheduled to be delivered in 2014, and the last aircraft is scheduled to be delivered in 2018 with deliveries of additional aircraft, if any, scheduled between 2016 and 2021.
Delta (DAL)
Standouts in Delta’s fleet are 117, 20-year-old MD-88s, and surprisingly, 39, 34-year old DC-9s (I’m blown away the firm hasn’t parked these). The firm has 164, 757-200s that are about 18 years old, as well. The average age of Delta’s fleet, which does include some regional jets (so the age comparison may not be completely apples-to-apples to peers presented in this article), is 15.1 years.
What is Delta buying?
From its 10-K:
Our aircraft purchase commitments at December 31, 2010 relate to 18 B-787-8 aircraft and 12 previously owned MD-90 aircraft. During 2010, we entered into an agreement with The Boeing Company to reaffirm our previous orders for 18 B-787-8 aircraft and to defer delivery of those aircraft from 2008-2010 to 2020-2022. Our aircraft purchase commitments do not include orders for five A319-100 aircraft and two A320-200 aircraft because we have the right to cancel these orders.
United Continental (UAL)
United Continental has nearly 140, 757-200s that are over 17 years old and 21, 767-300ERs that are over 18 years old. The average age of United Continental’s fleet is about 12 years, by my estimate.
What is United Continental buying?
From its 10-K:
As of December 31, 2010, United and Continental had firm commitments and options to purchase the following aircraft: Firm commitments to purchase 125 new aircraft (50 Boeing 737 aircraft, 50 Boeing 787 aircraft and 25 Airbus A350XWB aircraft) scheduled for delivery from 2011 through 2019. Of these commitments, four Boeing 737 aircraft are scheduled to be delivered in 2011. UAL has not received a revised Boeing 787 aircraft delivery schedule from Boeing, but it currently expects the first of its Boeing 787 aircraft to be delivered in the first half of 2012. Purchase options for 94 additional Boeing 737 and 787 aircraft, and 42 Airbus A319 and A320 aircraft…Purchase rights for 50 Boeing 787 and 50 Airbus A350XWB aircraft.
The Bottom Line
When costs are measured in pennies per mile in the airline industry, having the most fuel-efficient fleet matters. Both AMR and Delta are weighed down by the oldest fleets among the legacy carriers, a burden that presents itself in high fuel costs and elevated future capital outlays as they seek to replace their aging airplanes.
Disclosures: Brian Nelson owns put options on AMR at the time of this writing.