The airline industry has always been a tough place to make money. Famed investor Warren Buffett has been quoted as saying that the industry as a whole hasn't made a profit in its 120-year history.
Aviation industry consultant Mo Garfinkle puts it this way: "How do you make $10 million in the airline business? You start out with a hundred million."
In 2009, the International Air Transport Association expects the industry to lose almost $5 billion. The weak economy means fewer people are flying and companies are sending less air freight.
Parking In The Desert
To save money, airlines are grounding more aircraft than at any time since 2001, according to Steve Coffaro, vice president of the Evergreen Maintenance Center in Marana, Ariz., north of Tucson. Some 200 aircraft, wrapped in mylar and plastic, are parked at the facility in the desert. And Coffaro expects another 30 to 40 soon.
The planes include old DC-9s and 737s, as well as newer 747s and 757s. Many will fly again when times improve. Some will be sold for parts and scrap metal. The reason is pretty simple: Air travel is down, with the number of passengers dropping 12 percent from last year. And the money being spent on plane tickets is down 19 percent.
"Operating the aircraft with fuel and everything else that goes with it [costs] an average of $5 to $8 million per year," Coffaro says. "Keeping the aircraft down for $50,000 a year gets the best bang for the buck."
The storage facility is here because there's lots of land and because the dry weather makes it easier to preserve the planes. Last year when oil prices were $140 a barrel, domestic airlines began parking more aircraft here. Now, even though fuel prices are down, there's a worldwide recession. So Coffaro says international carriers are grounding planes.
"We just have received 14 MD-80 aircraft from various operators in South and Central America. There's been reports that up to a hundred of these particular type aircraft have been parked throughout the United States, including here in Marana," Coffaro says.
More planes on the ground, of course, mean fewer employees. Last year, U.S. carriers announced 28,000 job cuts. There are also fewer planes that fly between airports.
For a medium-sized airport like Tucson — 30 miles south — the choices have really narrowed. Richard Gruentzel, the airport's chief financial officer, says it's harder to get somewhere from Tucson without having to make a connection.
Fewer Flights
Passengers can still get most places with one stop. But with fewer flights in the air, planes are more likely to be full.
"The business of an airline is to put fannies in seats. And once that airplane takes off and leaves, you've lost the opportunity to ever do that," says longtime aviation analyst John Pincavage.
In other words, it's better to make a little money than none at all. Airlines are offering low fares these days — largely because of one saving grace: Fuel prices are a third of what they were last summer. It's good news for travelers, and Pincavage thinks it'll stay that way for a while.
"Passengers and travelers, I think, are going to be in for some decent times," he says.
There's another upside for travelers. It's one you wouldn't expect with full planes: The latest data released by the Department of Transportation for February 2009 show fewer late and cancelled flights. And, despite recently added charges for things like checked luggage, it also shows fewer complaints.
"Better baggage handling, less lost bags and that sort of thing — just because there's less volume moving through the system," says Gruentzel from the Tucson airport.
Some passengers at Las Vegas' McCarran International Airport had no real complaints. Jessie Festa and Alex Sammit were on spring break from New York.
"The flight and getting through security and everything — it was easy," Festa says. "I thought it went really smoothly."
"Yeah, I was expecting worse," Sammit says. "We went through in like 10 minutes."
That could change if more people fly during the summer as they typically do. It also might change if airlines lay off more workers, if fuel prices go up, or if the recession lasts beyond the end of the year.
That would probably cause airlines to park even more planes in the Arizona desert.
