Coronavirus disrupts air carriers’ lease plans

With South Korean air carriers slashing the number of routes they operate over the COVID-19 spread, their plan to lease new aircrafts to increase competitiveness has hit turbulence, according to industry sources Wednesday. 

Asiana Airlines’ budget carrier Air Busan had signed up to lease two Airbus 321 Neo LR aircrafts and is scheduled to receive one this month. The model can fly up to 7,400 kilometers, covering midrange routes such as to Singapore, Jakarta and Bali. 

According to the low-cost carrier, it had planned to operate the plane on the Busan-Ho Chi Minh route, which was to be launched in April. But due to suspension of all Vietnamese routes over COVID-19 concerns, the aircraft will now be used to fly domestic routes. 

While the other plane is expected to be delivered in the second half of this year, the air carrier said it is negotiating to delay its delivery, given the “situation that it cannot fly the aircraft even after delivery.” 

Following the latest epidemic outbreak, Air Busan has suspended all its 32 international routes, with four Japanese routes being added to the list this week. 

“A budget carrier which leases all its aircrafts must make at least 2 billion won ($1.67 million) daily sales to cover the labor costs and lease fees,” said an industry insider.

Budget carrier T’Way had announced earlier this year its plan to expand long-haul routes by introducing midrange aircrafts. 

But due to the suspension of routes, T’Way CEO Chung Hong-geun said the company “may have to return the leased aircrafts instead of accepting new deliveries.”

Full-service carrier Korean Air said it is also contemplating reviewing its plan to introduce new aircrafts, according to industry sources. It was expecting to receive four Boeing 787-9 planes this year. It has leased around 17 percent of its total 164 operating aircrafts. 

Asiana Airlines was also planning to introduce seven new aircrafts including A350 and A321 Neo LR this year. But the financially-troubled air carrier is highly likely to alter the plan, industry insiders said.

Asiana has leased 61 percent of its total 82 operating planes, as of 2018.
Market data showed that Asiana spend 40 percent of its total sales to pay for the leased planes, which is above 2 trillion won.

By Kim Da-sol (ddd@heraldcorp.com)