Where are low-cost carriers cutting back now? new aircraft | Real Time Headlines

Airlines that have been clamoring for new planes for years are changing their tune.

Cash-strapped, low-cost and heavily discounted airlines are putting off billions of dollars spent on new planes to save money as they try to return to steady profitability and face the impact of engine repairs.

This year, airlines have flown to the United States in large numbers, resulting in lower fares, especially in the domestic market where low-cost airlines are concentrated. While rising costs have also put pressure on airline revenue. spirit airlines, JetBlue Airways and Frontier Airlines The last time it reported an annual profit was in 2019, larger airlines have returned to profitability.

The drop in airfares is eye-catching: Hopper, a fare tracking company, estimates that a “good value” ticket for a round-trip domestic flight in the U.S. was $240 in September, down 8% from last year.

Now, some of those airlines are scaling back their growth plans and delaying new aircraft deliveries. Most of the price of an aircraft is paid upon delivery.

“There’s too much supply, so as an industry we’re naturally going to reduce supply,” said Frontier Chief Executive Barry Biffle. Frontier said earlier this month it would delay the purchase of 54 Airbus planes until at least 2029.

Part of the problem, Biffle said, is that years of aircraft delivery delays mean airlines don’t want to add too many planes too quickly.

“Because they had so many delays, (orders) were piling up,” he said. “So we have to solve this problem”

Despite a 17% increase in ridership, Frontier’s second-quarter revenue was still up 1% from the same period last year, and average fare revenue fell 16% to just under $40.

JetBlue Airways It is estimated that deferring the purchase of 44 Airbus A321 aircraft until 2029 and electing to extend the lease period of some aircraft will save approximately $3 billion. New York Airlines released unexpected profits in the second quarter, but are working to reduce costs through steps such as deferrals and exits route — and it hopes to do so as soon as possible.

The airline and others are also grappling with concerns over the grounding of planes from one airline Pratt & Whitney engine remember.

JetBlue CEO Joanna Geraghty said in an Aug. 19 note to employees that delaying the delivery of so many planes even though the airline is experiencing a shortage of planes due to engine recalls is “a big mistake.” “Double-sided blade”.

“We need aircraft to grow, but the fact that aircraft are delivered that end up on the ground after we pay for them makes the problem worse,” she said. “Additionally, given our mounting debt, we simply can’t afford that much “Multiple planes.”

spirit airlines – among them Planned to be acquired by JetBlue Airways Until a judge blocked the deal in January – and the company had delayed aircraft deliveries in an effort to reverse the company’s deep losses.

Spirit earlier this month reported an 11% drop in revenue and a loss of $192 million, compared with a loss of about $2 million a year earlier, and said it would furlough about 240 pilots in the coming weeks. The airline has been particularly hard hit by the Pratt & Whitney engine recall.

The airline said all Airbus planes ordered from the second quarter of next year to the end of 2026 have been postponed until at least 2030.

Aircraft leasing company AerCap said earlier this month it would take on 36 of Spirit’s Airbus A320neo family aircraft from airline orders. Chief Executive Gus Kelly called the deal a “win-win” for the airline and AerCap.

Eddy Pieniazek, director of consulting at aviation consultancy Ishka, said lease rates for new Airbus A320s and large A321s hit new average monthly records in July of $385,000 and $430,000 respectively. Meanwhile, new leases boeing company Pieniazek said the 737 Max 8, the most common model, sells for a record-breaking $375,000 a month.

Airlines can purchase aircraft directly from suppliers or lease aircraft from companies such as aviation leasing or air cappay monthly rent. Some airlines, such as Frontier, have been active in sale-leaseback operations, which involves selling aircraft to generate cash and leasing them back.

Boeing and Airbus, the world’s two main suppliers of commercial aircraft, are working to increase production as the aftermath of the coronavirus pandemic lingers. Skilled worker shortages and supply shortages. Airbus recently lowered its delivery target for this year, while Boeing Co. has been limited in production increases as it grapples with issues. security crisis.

Although budget airlines have delayed orders, an Airbus spokesman said the company had not seen any slowdown in demand for the A320 family, which still has more than 7,000 outstanding orders. Boeing has received nearly 4,200 orders for its rival 737 Max aircraft.

“We offer a full range of aircraft to meet our customers’ needs and maximize their flexibility in fleet decisions,” an Airbus spokesperson said in a statement.

But airlines are feeling the pinch, too. Executives say delays in new plane deliveries have forced them to slow or even halt hiring and other growth plans.

“We are urgently and deliberately pursuing opportunities to mitigate cost pressures, including the impact of previously reported overstaffing resulting from Boeing delivery delays,” Southwest Airlines Chief Financial Officer Tammy Romo said on an earnings call last month. The all-Boeing 737 airline offers a voluntary leave program for some employees.

Asked about Southwest’s fleet plans, Romo said the airline “has a lot of flexibility with its orders from Boeing. Boeing did not comment for this article.

“We’re not ready to lay out all of our plans yet,” Romo said, adding that the company would provide more details at its investor day on Sept. 26. “But we have enough flexibility to rearrange orders to ultimately meet our needs.”