Air Transport World

Too much of a good thing? (coming surplus of commercial jet transports)

Airlines order in good times and take delivery in bad times. They'll get 3,000 planes during 1991-95. And it looks like we're entering bad times. By Perry Flint.

Airline-industry analysts see evidence of a coming surplus of commercial jet transport aircraft that is likely to cause values for some types to fall over the next few years. The surplus, say analysts, will arise as a result of two basic facts:

* The large number of new aircraft scheduled for delivery during the next few years.

* The even larger number of old jets still in active service, many of which will enter the secondary trading market in those years.

Although the surplus was predicted prior to Iraq's invasion and occupation of Kuwait, clearly the short-term outlook for the airline industry has taken a dramatic turn for the worse because of the invasion and its effect on jet-fuel prices. Even if no other fallout from the invasion occurs, the rapid increase in the cost of jet fuel will plunge the industry into a period of severe financial stress. If, as expected, a full-fiedged global recession occurs, the damage will be magnified as traffic growth slows or stops, resulting in further excess capacity.

But the signals from the industry are mixed, reflecting the uncertainty about the immediate future. For example, some U.S. airlines have postponed deliveries of aircraft scheduled to arrive within two to three years, while at the same time, they have ordered more aircraft for delivery later in the decade. And despite what is assumed to be a shortage of lift, dozens of new, highly desirable aircraft have languished on the trading market tor many months while delivery positions for similar aircraft have been sold at a premium.

Buying for the future

Jack B. Feir, a Huntington, N.Y.-based aviation consultant, points out the contradiction: Airlines want to "sew up their future" by making sure that they have plenty of airplanes on order for delivery several years from now. …

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