Re: Economics of new vs. older planes

From: (Terrell D. Drinkard)
Organization: Boeing
Date:         29 Dec 92 22:53:50 PST
References:   1
Followups:    1
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In article <airliners.1992.165@ohare.Chicago.COM> John DiMarco <> writes:
>I understand there's an airfield in Arizona where unused airliners are parked
>for extended periods. I'm wondering, considering the economic doldrums
>most airline companies seem to be in, why these planes are not put into
>use in lieu of buying new ones? 
>The answer, I think, would depend on the difference in operating costs between
>new and older planes. Could someone with a better understanding of these issues
>shed some light on this? Solid numbers (eg. purchase prices of new vs. used
>planes, fuel consumption differences, etc.) would be highly appreciated.

Well, it is not a simple question John asks here.  For instance, lots of
727-200s parked at Davis-Monthan, and at Mojave.  A used 727-200 Advanced
should bring between one and two million (prices are subject to
inbelieveable fluctuations).  727s of any sort are no longer available new.
The nearest replacement airplane, regardless of what the Boeing PR office
may say, is the Airbus A320 - catalog price of about $41 MILLION.  Granted,
the 727 has a fuel burn half again larger for the same route, same payload,
same speed, but it costs a whole lot less to acquire.  Unfortunately for
727 owners, they are stage two noise compliant.  This means that they will
no longer be allowed to operate in the domestic US after 2000 or so.
Europe is much the same.  This short economic life must be take into
account before purchasing our hypothetical 727.

Another aspect is if one has already purchased a 757, for instance, then
one is still obligated to make the loan payment each month.  And the loan
payments are huge.  So, if you already have the airplane, you may as well
put it to work, especially if it is more efficient than some other

Lastly, I'd like to mention that over-capacity is one primary problem that
the airlines are trying to deal with.  Adding more available seat miles is 
not a solution.

"Anyone who thinks they can hold the company responsible for what I say has
more lawyers than sense."