Malaysia Airlines (MAS) expects to ground eight Boeing 747-400s and 777-200s next year after sweeping route reductions are implemented in an effort to cut overcapacity. In a separate move South Korean carriers Asiana Airlines and Korean Air (KAL) are seeking cash aid from the government.

The loss-making Malaysian carrier, renationalised earlier this year, has three new 747-400s and two 777-200s due for delivery by the end of October next year. Radical network cuts are being imposed over the coming months, and studies show six 747-400s and two 777-200s will be surplus by October 2002. The carrier says it does not expect to be able to find buyers for the aircraft, and they will probably have to be grounded as wet-lease customers are sought.

MAS has been suffering financially for years and announced in September that within six months it will have scrapped loss-making services to 12 international destinations, in addition suspending flights to New York. Frequency cuts are being made on other international routes.

Meanwhile, Asiana and KAL are seeking compensation and tax breaks from the South Korean Government for losses sustained after the 11 September terrorist attacks in the USA.

It says it has agreed in principle to compensate the carriers for losses, but warns that compensation will not be forthcoming for losses sustained prior to the US terrorist attacks.

Industry observers in South Korea expect aid to amount to hundreds of millions of dollars in subsidies and gains from tax cuts and other regulatory changes.

The bulk of the new aid package is expected to be in the form of loan guarantees, as well as through subsidies for loss-making domestic services.

Tax breaks are also likely to be offered for aircraft payments and for other purchases, while creditors, many of them government-controlled, are expected to agree changes to debt repayment schedules.

Asiana and KAL submitted wide-ranging internal restructuring proposals to the government late in September. They call for job cuts, and fleet and other operational reductions, among other cost-cutting measures.

Source: Flight International