Asian airlines are continuing to downsize their existing fleets and defer new aircraft deliveries in a bid to bring capacity in line with shrinking demand. But deliveries of new aircraft for the next five years will still produce a net increase in the size of Asia's overall fleet.
Carriers are employing a variety of techniques to cut capacity. Where they own aircraft, they are trying to become sellers or, failing that, lessors. Asiana has had the most success in outright sales. It has sold one Boeing 747-400 and three 767-300s and is talking about a sale of its 767 freighter. But Philippine Airlines has announced an even more ambitious disposal plan. It is proposing to sell 13 aircraft as part of its rehabilitation plan that calls for disposing of 40 of its 54 aircraft.
Cathay Pacific has had no success with outright sales. It has talked with several potential buyers for five of its 747-300s but so far has only been able to lease two of those jets to Virgin Atlantic. Meanwhile, neighbouring Air Macau has leased one A320 to TAP Air Portugal for six months with an option to renew.
A number of carriers have also sold and leased back parts of their fleet, but that has more effect on balance sheets than capacity.
Airlines which lease rather than own their aircraft have fewer options. Without lessor consent, they cannot sublease excess aircraft. Thus their only option is to cancel, which usually provokes penalties. Garuda Indonesia has had some success in negotiating lease cancellations, which require working with the lessor to find substitute lessees. Garuda has made such an arrangement with Boeing on six MD-11s, and is currently talking with Airbus about a similar deal with six A330s. One of Boeing's conditions for accepting the MD-11 cancellations reportedly was that Garuda do the same with its A330 leases.
Merpati Nusantara has returned 11 leased aircraft and was planning at presstime to return two more A310s. Philippine Airlines hopes to return 27 aircraft.
Downsizing is obviously not limited to current aircraft. So far no Asian airline has actually cancelled a firm order, but Philippine Airlines plans to try. It wants to cancel orders for eight A320s and three 747s due for delivery later this year. Because of the long wait for A320 delivery positions, PAL should have little problem finding buyers for the A320s; several have already shown an interest. Selling the 747 delivery positions could be harder.
The most common technique for suppressing fleet growth has been to defer deliveries. Malaysia Airlines has negotiated delays on seven 747s and 777s. Garuda postponed delivery of six 777s until 2002. Dragonair has slid delivery of one A320 until mid-2000. Cathay has postponed no deliveries, but bought extra time to decide if wants to exercise options on 10 A330s and six 747-400s.
Some deferrals have been involuntary. Deliveries for Thai Airways have slid or seem likely to slide on five A300s, one 747, and one 777 due this year because of Thai's difficulties in finding finance.
The final technique simply is not to order aircraft in the first place. Boeing recently predicted Asian carriers over the next five years would order 150 fewer jets than previously predicted. Many Asian airlines have quietly shelved plans for orders, but the most visible was EVA Airways's recent disclosure that it will delay until 2000 a decision on whether to confirm a previous tentative order for six A340s with six options.
Source: Airline Business
