Malaysia Airlines and Asiana have both effectively abandoned any fleet strategy, and are putting their entire fleets up for sale in bids to overcome the Asian economic slump. Meanwhile Malaysia's regional airlines have hit severe problems while, ironically, a new Fiji-based startup still aims to brave the economic storm.

Asiana has confirmed plans to sell some of its aircraft under sale and leaseback deals. The airline intends to reduce its fleet by selling five aircraft by the end of the year, with Boeing 747-400s the most likely to go. The carrier has also deferred delivery of four Airbus A321s due to arrive in 1999.

Malaysia Airlines confirms that it is reviewing its fleet and will be making a formal announcement shortly. A sale could provide much needed foreign currency for the cash starved carrier.

One airline source sees the sale as 'not the best strategic move, but it is very brave. It is most likely driven by the [Malaysian] government reacting to the economic situation, and is effectively a defence of the ringgitt.'

Both carriers remain tight-lipped about the amount of revenue the disposal programme will generate and the timescale for the sales.

Asiana's shareholders are poised to sell a 30 per cent stake in the carrier, now that the Korean government has approved its bid to boost foreign ownership limits from 20 per cent to 50 per cent. British Airways and American Airlines are said to be the top bidders. Pacific Investment Capital already owns 19 per cent.

At the same time, Asian aviation analysts are abuzz with rumours of a merger between Asiana and arch-rival Korean Air, despite official denials.

The depth of the Asian crisis was underlined in early March by the collapse of Malaysian regional startup Saeaga Airlines and service cutbacks by Pelangi Air. Earlier another domestic regional carrier, Asia Pacific Airlines, was grounded after only three months of operations. All three were suffering declining passenger loads and escalating costs due to the depreciation of the Malaysian ringgit.

This echoes a forecast in a recent report by Moody's that the Asian crisis will hit small airlines the hardest. Moody's predicts that the carriers to take the biggest hits will be those heavily dependent on intra-Asian air traffic, which on some routes is down by 60 per cent compared to last year.

The report claims that Asian carriers face enormous difficulties because of currency devaluations. While their cash flow is denominated in local currencies, they still have to meet aircraft and fuel costs in US dollars, and in some cases devaluation means these have effectively doubled. Moreover, Moody's points out, these airlines' small networks make it difficult to reposition aircraft onto more profitable routes.

Despite the difficult conditions, a new startup seems intent on braving the regional economic storm. Fiji Air International (FAI), headed by chief executive Alan Lindrea, is in talks with Malaysia Airlines to lease two B747-400 combis for use on planned services from Fiji to London/Stansted via Singapore. Talks about leasing two more B747s from Singapore Airlines were abandoned earlier this year, delaying FAI's planned April launch date.

According to one analyst, if Fiji does launch, it is unlikely to be before mid-1998, or even the third quarter. An unnamed Singapore businessman is said to be providing the financial backing for the airline.

Source: Airline Business