South Korea’s Asiana Airlines has revealed plans to drop routes and some aircraft in an effort to strengthen its financial performance. The airline is yet to reveal which of its 87 routes and 83 planes will be affected. However, the major South Korean airline operates six A380’s, an aircraft which has previously proven unprofitable for other carriers.
According to Reuters reporting, the cuts were outlined in a letter to Asiana Airline employees penned by CEO Han Chang-Soo, who said:
Though it seems market concern about our airline is dissipating, we need to restore trust through bold innovation.
Will Asiana Airlines ground its A380s?
The letter did not appear to detail the exact cuts and, at the moment, there is no specific indication that Asiana Airlines will retire its A380s. But, just a few weeks ago Qatar Airways confirmed plans to retire its entire fleet of A380s on their 10th anniversary. Air France will also drop half its fleet of the super jumbo.
Sales of the 600-seater jet never really took off, and those who did buy it struggled to fill the giant cabins and thus to cover costs.
Asiana Airlines’ A380 routes include Seoul to Hong Kong, New York, and Sydney. Cirium’s Fleets Analyzer reveals the airline also runs 25 Airbus A320s and six A350s, and has orders pending for an additional 24 A350s. Equally, there is no news yet as to whether future orders for Asiana Airlines will be affected.
Pressure on profits and stocks
The South Korean airline is reacting to pressure to improve its financial situation. Its co-CEO resigned last week, and its parent company Kumho Asiana Group is currently seeking financial support from a creditor. This, after its auditor refused to sign of its latest financial reports, lead to a pause in the trading of Asiana Airlines’ shares. The stock is at a five-month low, losing 13% just before the halt in trading began.
Asiana Airlines is considering the sale of assets and internal restructuring in further efforts to cut costs and turn a profit. The company had forecast an operating profit of $158 million for 2018, but net losses emerged at $26 million, down 88% on the previous year. The losses were disclosed after the disagreement with the auditor and the co-CEOs resignation. Kumho Asiana Group chairman Park Sam-Koo also resigned last week.
A committee is being established by Asiana Airlines to pursue the changes. It will also be working with the airline’s main creditor, Korea Development Bank, which expects turnaround plans.
Any sale of assets could boost short-term profitability and the company’s credit. According to Nasdaq an unnamed South Korean industry analyst has said:
Selling off their jets to leasing companies might be an option for Asiana, but it takes quite some time to conclude deals.
If South Korea’s Asiana Airlines is considering selling A380s it may find it’s not the easiest of aircraft to sell. Airbus announced in February 2019 that it would scrap production of the A380 for this very reason, although it still remains somewhat popular with wet leasing ompanies.