Modernizing the Fleet: Phoenix Aviation Symposium

There really was a never-ending parade of interesting panels at the Phoenix Aviation Symposium last week, and today I’m focusing on one called, “When is it time to modernize the fleet?” If you ask the manufacturers, the answer is now, of course. (They’ll gladly sell you an airplane any time you’d like.) But of course, the answer isn’t that simple.

John Jamotta, Senior Director of Schedule Planning at Southwest kicked things off by saying how simple things used to be. “We called up Boeing, they sent us airplanes, and often they were already filled with passengers.” Sounds like a good strategy to me.

But the big cloud hanging over the panel was the difficulty in accessing capital. Mary Prettyman at Airbus talked about it early and it’s clearly something that’s on everyone’s minds as more and more deliveries come closer that have yet to be financed.

Talking about when it is time to modernize the fleet, the discussion moved to the issue of whether airlines should buy current technology or wait for something new. Mary suggested that this was a bigger issue six months ago but said that “we’re really looking at the end of the next decade before these products mature.”

And why is that? Engine technology is one big piece of the puzzle, and the Pratt & Whitney Geared Turbofan, while promising, still needs a lot more time on the wing, according to Managing Director of Boeing Capital Corp. Kostya Zolotusky, to see how the complex gearing handles over time.

It wasn’t much of a surprise that most of the conference attendees agreed with Mary. Sixty three percent of those in the room figured there wouldn’t be a replacement by 2018 and Kostya agreed. “I think they’re going to make money on that bet.”

John from Southwest didn’t seem thrilled with that answer. Southwest is looking for a better solution. “If we could provide a platform that provides an enormous unit cost benefit, we could meet our social obligations to the people who work for us and to our customers . . . . We’re needful to have dramatic changes in our production costs. If you don’t have a plan to reduce production costs, then you have to go to a revenue plan. There are certain times where customers are paying for the unit cost creep.”