Southeast Asia budget airline boom turns sour for planemakers, lessors

Southeast Asian low-cost carriers, a key growth engine for planemakers and leasing companies for a decade before the pandemic, are faltering financially as demand plunges, raising questions over whether they can replace and double their fleets. Auditors for Malaysia's AirAsia Group and Vietnam's VietJet Aviation are concerned about cashflows and funding, while Indonesia's Lion Air has put the brakes on a planned flotation. Even before the pandemic, bankers and leasing bosses were worried about whether aircraft ordered during a decade-long buying frenzy by Southeast Asian carriers would end up being delivered. The carriers, which have offshoots in multiple countries, have 938 planes on order and lease most of their existing fleets of 476 planes, according to Aviation Week data. Budget airlines with large domestic operations are well-placed for a post-pandemic recovery, despite having less financial support than state-owned rivals. Their lower cost structure helps reduce the rate at which they burn cash and gives them the flexibility to benefit first from any recovery, analysts say. But with borders shut and economic growth stunted, a return to the low-cost international travel needed for them to afford all of the planes they have on order looks increasingly doubtful - a worrying sign for the companies that make and lease aircraft. "One area that I'm concerned about generally is just those low-cost carriers who ordered too many aircraft," Robert Martin, CE of Singapore-based lessor BOC Aviation said. "I think there will still be work to be done on those during the third quarter," he said, referring to negotiations over current lease contracts.<br/>