Aircraft deferrals will play a key role in Asian airline recovery

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Most Asia-Pacific airlines have been pursuing aircraft delivery delays in response to the COVID-19 crisis. Although several airlines acted quickly and secured deferrals relatively early in the pandemic, some important negotiations have occurred more recently. These latest arrangements highlight the differing approaches to deferrals being taken by the region’s airlines.  

Korean Air and Singapore Airlines are recent examples of airlines making substantial deferrals to push back spending commitments while also preserving their long term fleet renewal strategies.

The major Japanese airlines, however, are only making minimal postponements. The independent LCCs are generally trying to spread out their vast numbers of deliveries while some, such as IndiGo, are taking their aircraft as scheduled.

Few Asia-Pacific airlines will come through the pandemic without some degree of aircraft order deferments. In many cases these negotiations are key aspects of broader airline restructuring efforts.

Deferrals represent one of the main tools airlines have available for pausing growth and reducing fleet costs, along with early retirements, lease returns and order cancellations. Postponing rather than terminating orders is obviously preferable to manufacturers, particularly since Asia-Pacific airlines account for more of their order backlogs than any other region. Allowing delays also helps ensure customer survival.

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