COVID-19 Shutdown... Aircraft Acquisition Plans Also in Limbo

On the 2nd, aircraft are parked on the apron at Incheon International Airport. Photo by Mun Ho-nam munonam@

[Asia Economy Reporter Yoo Je-hoon] As the novel coronavirus disease (COVID-19) crisis hits the aviation industry hard, the aircraft acquisition plans of Korean national airlines are plunging into uncertainty. While new acquisitions are inevitable for entering new routes, expanding the fleet inevitably leads to losses amid a situation where international passenger numbers have plummeted by more than 90% compared to the previous year.

According to the aviation industry on the 19th, Asiana Airlines is currently discussing adjustments to the aircraft delivery schedule with Airbus of the European Union (EU), which was originally planned for acquisition within this year. The airline had initially selected next-generation main aircraft such as the A350 and A321neo, planning to introduce 3 and 4 units respectively this year alone, but since acquiring one A350 in February, there has been no significant movement. Korean Air is also reported to have recently reported to its board of directors about changes in the delivery schedule for some aircraft models. Korean Air had also planned to introduce 4 B787-9s and 6 B737 Max models this year.

Adjusting the timing of aircraft acquisition is not limited to major airlines. Low-cost carrier (LCC) T'way Air, which has been considering acquiring medium-sized aircraft such as the A330 aiming for long-haul routes by the end of the year, is also in a difficult position. It has recently been allocated the Incheon-Croatia route by the Ministry of Land, Infrastructure and Transport, continuing its attempts to enter long-haul markets. Air Busan is also reportedly negotiating with lessors to adjust the delivery schedule of additional aircraft such as the A321neo LR planned for acquisition within this year.

A T'way Air official said, "Due to entry restrictions caused by COVID-19, it is currently difficult to even contact lessors for aircraft selection," adding, "The atmosphere is that related procedures such as aircraft acquisition will not start until the first half of next year at the earliest."

Korean national airlines rapidly expanded their fleets during the aviation market boom in the 2010s. According to the Ministry of Land, Infrastructure and Transport, the number of aircraft used for domestic and international transport by national airlines nearly doubled from 224 in 2010 to 414 last year.

However, the situation changed following last year's 'Japan travel boycott' and this year's COVID-19 crisis. LCCs have suspended all international routes, and the international flight operation rate of major airlines has plummeted to around 10%. As cash inflows decrease, the more aircraft remain grounded, the higher the fixed costs such as lease fees, which inevitably translate into losses for airlines.

Recently, some airlines have even reduced their fleet size by returning leased aircraft. Eastar Jet, which suspended operations on all routes due to financial difficulties, is a representative case. Eastar Jet returned a total of four aircraft early to lessors by April and is known to plan additional returns in the future. The airline had introduced the B737 Max 8 model last year to enter medium-haul markets, but just three months after acquiring the aircraft, operations were suspended due to aircraft defects, leaving the airline to pay tens of millions of won in lease fees every month.

This trend is no exception for global airlines. United Airlines recently sale-and-leasebacked 22 of its aircraft to a Chinese aircraft leasing company, and Etihad Airways also urgently sold 38 of its aircraft to lessors.

An industry insider said, "Selling aircraft is the last card for airlines," adding, "If the recession prolongs, there will be more cases of returning aircraft with reduced lease periods and postponing existing acquisition plans."

This content was produced with the assistance of AI translation services.