January 19, 2015 / 9:05 PM / 5 years ago

Oil price fall gives lease of life to old planes

DUBLIN, Jan 19 (Reuters) - The slump in oil prices has given a new lease of life to passenger jets that until recently were destined for the scrap yard, aircraft financiers said on Monday.

Aircraft such as the four-engined Airbus A340 or earlier models of the Boeing 747 which have been sentenced to desert storage or to be dismantled, are winning a stay of execution because lower oil prices make them economic for some carriers.

“We are seeing a big pick-up in demand for aircraft we thought we would scrap,” Aengus Kelly, chief executive of AerCap, told the Airline Economics conference in Dublin.

AerCap, the world’s largest independent leasing company, has recently leased out older passenger aircraft and freighters such as Airbus A340s, Boeing 747s and 757s, rather than sending them to be dismantled, he said.

Others said some airlines were retrieving mothballed Boeing 747s from desert storage to get them flying again.

The aircraft industry has seen a record wave of orders for a new generation of fuel-saving, carbon-fibre aircraft in recent years as airlines sought protection from high oil prices.

Most in the industry believe those orders will stay in place, since fleet-planning is a long-term and risky activity.

But the 50 percent drop in oil prices has also made it easier for airlines that cannot afford new fleets, or those that face long waits for new jets, to put their faith in vintage aircraft.

The A340 is a long-haul aircraft with four engines and has been superseded by the more economical twin-engined Boeing 777.

“At the new price of fuel, (the A340) does become a great aircraft to those who are looking for interim lift,” Bill Cumberlidge, executive director of KV Aviation, an investor and manager of aviation lease transactions, said.

Kelly told Reuters the potential lives of some older aircraft such as the Boeing 747 and 757, or Airbus A340, had been extended by three and four years beyond the 18 to 19 years originally intended.

That adjustment is being felt in aircraft recycling yards such as UK-based Air Salvage International.

“Unscheduled or repossessed aircraft are not coming in as frequently as when oil prices were sky high,” said Mark Gregory, founder of Europe’s leading aircraft dismantling operation.

But the company is still actively recycling aircraft that are scheduled to be taken out of service due to their age or upcoming heavy maintenance deadlines, he said. (Editing by David Clarke)

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