Airlines

SAS: MD-80s would still be economical if fuel price doubled

By David Kaminski-Morrow

SAS Group still appears reluctant to renew its Boeing MD-80 fleet despite the current cost of fuel, claiming that the type would still be economical even if fuel prices doubled.

Scandinavian Airlines has around 57 MD-80s, although about a dozen are leased out. The carrier has been considering the economics of renewing the fleet but has yet to be convinced that an early retirement is in its interests.

In its newly-released annual report SAS Group says the effect of capital costs means the MD-80 is SKr5-10 million ($0.8-1.6 million) more profitable to the carrier than newer aircraft.

Capital costs for the type are SKr20 million lower, more than offsetting the SKr10-15 million in higher fuel and maintenance costs.

“With respect to fuel consumption, the fuel price can double without the seat cost for the aircraft becoming more expensive than what it is for newly-manufactured aircraft in the same size class,” claims SAS Group, although it adds that its estimates do not take economies of scale into account.

“The lower capital cost also provides a cost advantage when matching production to seasonal demand.”

It states that the MD-80 fleet has a “long remaining useful life” of around 10-15 years and adds that economic, technological and environmental trends will determine the pace at which it phases out the type.

While SAS Group says a new generation of short- and medium-haul aircraft, with 20% lower fuel consumption than today’s narrowbodies, might be available before 2015, Boeing and Airbus have yet to commit firmly to a replacement for their 737 and A320 families.

Source: flightglobal.com's sister premium news site Air Transport Intelligence news