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OM in the News: Recycling Hits the Airplane Industry

March 6, 2012

In Supplement 5, we point out that the auto industry recycles more than 84% of cars scrapped each year. The new Mercedes S550 sedan is designed to be 95% recycled, years ahead of the EU standards that take effect in 2015. In general, auto manufacturers now design in such a way that materials can be easily reused in the next generation of cars. The same can not be said of the commercial airplane industry.

But the latest Businessweek (March 3-9, 2012) points out that sustainability is now on the minds of airlines for a variety of reasons. Older planes are being disassembled for their parts at an increasing rate, and the average age of planes has dropped by a third, to 18 years, over the past decade and a half. Rising fuel prices have made kerosene-guzzling old-timers unpopular with carriers. (Fuel makes up about 30% of operating expenses). United, which burns $25,000 of fuel every minute, is thinking of grounding the dated Boeing 737-500 and 767-200ER jets from its 1,200 plane fleet.

Older planes such as these used to end up in developing countries from Mexico to Indonesia to Kenya, where they found a home after being retired by Western carriers. But prodded by safety and environmental concerns, more and more countries are choosing new over used planes. Production of single-aisle jets, the most widely used type in the industry, is now at an all-time high. This leaves no shortage of cadavers to be recycled for parts.

Especially popular are engines coming off A320s and 737s.The turbines that house rotating parts (such as disks or blades that operate at 2,700 degrees F) require routine replacement and can cost $4.4 million new. Recycled disks and blades drop the price in half. Since an engine off the older 737-700 can be used in the newer 737-800 model, economic obsolescence has fueled the airplane recycling industry.

Discussion questions:

1. Why is the life cycle of airplanes getting shorter?

2. Why is recycling a major issue for operations managers?

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