AAR-hangar-shot-Broderick.jpg Sean Broderick/AWST

United Lauds Used-aircraft MRO Benefits

Carrier cites cheap used-parts option as upside to adding old aircraft.

United's growing reliance on used aircraft is more than a way to add inexpensive lift--it's also providing both fleet and aftermarket-support flexibility should a downturn hit that requires cutting capacity, the carrier's executives say.

Speaking on a recent earnings call, United President Scott Kirby emphasized that despite rising fuel costs, demand remains strong, and drastic capacity cuts are not on the horizon. But adding used aircraft is part of the carrier's strategy to meet its near-term capacity growth targets--mid- to high-single digits annually--without locking expensive, new aircraft, either via orders or leases.

"We built a fleet plan that allows us to capitalize on the opportunity inherent in the growth plan but while still maintaining the flexibility to quickly respond to adverse conditions," Kirby said.

That flexibility goes beyond fleet planning, Kirby explained. Having used aircraft also means ready access to used parts, which can help cut maintenance costs.

"When an older aircraft comes due for engine and airframe overhaul, we can complete the overhauls then continue flying it," he said. "Alternatively, we can ground the aircraft and essentially use many of the parts from these aircraft as spare and replacement parts for the remaining fleet. The economic impact of retiring the aircraft is actually positive to the [bottom line] because we both avoid the expense of the overhaul and save on inventory cost since using the parts from  our retired aircraft is less expensive than sourcing new parts from third parties."

United's thinking is further indication of a new-world-order among U.S. legacy carriers. While adding used aircraft isn't a new strategy, it's not often touted as a major capital-expense reduction lever. Delta Air Lines, which has embraced used aircraft both in the fleet and as spare-parts sources for years, is the exception, while United is a relative newcomer by comparison. But the Chicago-based carrier is making up for lost time.

United took delivery of a used Boeing 767-300ER earlier this month--one of three it is adding this year. All are ex-Hawaiian Airlines.

United has acquired or lined up more than 50 used aircraft in the last several years, and regularly adds more via lease buyouts on equipment it operates. While it continues to take delivery of new aircraft and place orders, it remains an active used-market participant.

"At the moment, we are focusing on a number of potentially attractive opportunities to supplement our new-aircraft order book," said acting CFO Gerald Laderman.

United's fleet plan, unchanged from its April update, has it ending the year with 768 mainline aircraft, up from 744 on January 1. Net additions include 10 737-9s, seven 787s--including its first three -10s, four 777s, and the trio of used 767s. Its regional fleet is growing to 554 aircraft from 518.

United took the first six of its newest 737s in the second quarter. "The performance of the aircraft has been excellent so far," Laderman said.

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