U.S. airlines largely stopped ordering new planes after Sept. 11, 2001, shrinking their fleets to adjust to a drop in demand. Travel has rebounded strongly, but airlines are, for the most part, years away from taking delivery on large numbers of new planes. A big reason is that Boeing and Airbus have committed most of their airliner production capacity in coming years to carriers in Europe and Asia.
The industry’s aging jets contribute to the general unpleasantness of air travel these days. They are often noisier and less comfortable than newer models. They are delayed by mechanical problems more frequently than new planes and often have built-up grime in passenger spaces. Add to that the fact that older planes are less fuel efficient and have worse emissions and you have supposedly one of the richest countries in the world producing some of the worst airplane pollution.
With the exception of Southwest Airlines, the major U.S. carriers have all either been through bankruptcy or narrowly avoided it in recent years. They returned to profit in 2006, but profit margins are still anemic – “amongst the worst industries in the country,” said Scott Kirby, president of US Airways. “The whole industry is hardly the poster child for strong credit.”
Thus, airline executives are cautious. Even with $3 billion now on hand, “anything we’d do with cash would be related to strengthening the balance sheet – paying down debt,” said Kirby. The airline recently placed a huge order for jets, but most of the deliveries are years off.
Philip Baggaley, a credit analyst at Standard & Poor’s, said that keeping a large cash reserve is, for some airlines, the best safeguard against another bankruptcy in the event of a recession or labor dispute.