Airplane Graveyard: Home of the Grounded Planes

April 27, 2009— -- Airlines are suffering through the recession as business and leisure travelers stay home. But one related industry is booming: the few companies that store and maintain grounded airplanes.

At the southern end of the Arizona desert, on the site of a former CIA base, sit hundreds of abandoned airplanes. It's an aviation graveyard and business is booming.

"Our company has experienced a 15-25 percent increase in storage over the past six months, and the current forecast would support another 15-20 percent inventory addition over the next quarter," said Steve Coffaro, vice president of sales of the Evergreen Maintenance Center in Marana, Ariz.

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As airlines find fewer and fewer passengers flying, they are deciding that the only way to stay in business is to ground planes, especially on money-losing routes.

The desert is an ideal place to store the planes. Without moisture, there is less risk of corrosion to the aluminum airframes. The deserts of Arizona, New Mexico and California are also practically immune to hurricanes, tornados, hail and other severe weather events that could damage the parked aircraft.

"Arrivals in the past year vary but two trends have been consistent and they include more international long-haul and next-generation aircraft," Coffaro said in an e-mail to ABC News.

Some of the planes that end up at Evergreen will never fly again. Others are refurbished and sold to airlines in developing countries in Africa and Latin America.

"The remarketing and transfer of ownership programs across the flight line continue to grow. We have also hired additional technical staff to support our expanded heavy maintenance requirements," Coffaro said.

This is not a good time for the airlines and they are doing everything possible to save a dime.

Last week, Continental Airlines said it lost $136 million in the first quarter and Delta posted a $794 million loss due to the weak economy and bad bets on fuel hedges. And earlier this month k American Airlines announced a $375 million loss.

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"From a consumer standpoint, you've never had it so good; routinely paying $250 or less roundtrip across the country," said Richard Aboulafia, vice president of analysis at Teal Group. "To sustain that, given the drop in traffic, planes have to come out of service."

Aboulafia said this a global phenomena. The U.S. carriers first started grounding planes in big numbers last summer due to record high oil prices. Now everybody is doing it because of the recession.

"Demand is falling and planes have to get parked. That's the only way for airlines to keep their heads above water," he said.

Edmund S. Greenslet, founder and publisher of The Airline Monitor, said last summer's fuel prices forced the airlines to look at the fuel efficiency of their fleets and to speed up plans to retire aircraft.

Those cuts actually left them in a better position when the drop in travel started.

"It's the first time they were on top of a problem before it became a problem," Greenslet said. "It is the key reason that the US airlines believe – and I am not prepared to quarrel with that belief – that they will in fact be able to make a profit this year, albeit perhaps a very small one, but nevertheless a profit."

Greenslet equates these planes to used cars.

"These are not bad airplanes … they are just not as good as the best airplanes," he said. They will ultimately end up "in regions of the world where they are not in an economic position to acquire new aircraft."

Some of the main planes ending up there are classic Boeing 737s, (the 300, 400 and 500 series) and MD-80s.

For instance, Greenslet said, United Airlines had 94 classic 737s in service at the end of 2007. By the end of 2008 that number had dropped to 46. United's overall fleet shrunk from 460 aircraft to 409. By the end of 2009, he doesn't expect the airline to have any more classic 737s.

"It's part of a necessary adjustment first for fuel and then you had a meltdown of the economy and that impacted traffic. And it's not just U.S., it's worldwide. U.S. carriers were more on top of the problem perhaps and had more of the airplanes that they could get rid of quickly than some other places in the world."