Discounter Lion Air struggling to pay for jets

PT Lion Mentari Airlines is struggling to make payments to lessors on some of its planes, according to people familiar with the matter, as the pandemic tips it ever closer to financial peril.

Indonesia’s largest discount carrier has grounded some 25 aircraft because it hasn’t paid lessors that are owed at least $500 million, one of the people said, asking not to be identified discussing sensitive information.

“The airline is considering returning six of its longer range Boeing 737-900ER jets to lessors in July,’’ the person added.

Some of the other 737-900ER jets the carrier owns might be offered in lieu of payment of arrears, according to the person.

Lion Air spokesman Danang Prihantoro declined to comment.

Like many airlines, Lion Air’s business has been decimated by the coronavirus pandemic.

While a bounce-back in air travel has helped carriers in the United States and parts of Europe start to recover, in Southeast Asia many international borders remain shut due to fierce Covid outbreaks and low rates of inoculation.

Passenger capacity in Indonesia is still around 41% below 2019 levels, data from flight-tracker OAG shows.

Letting go of some of its planes may help to ease the financial strains on Lion Air.

The privately-held company has several carriers within its group structure that in total operate a fleet of more than 250 jets.

Some of its other brands include Malaysia’s Malindo Air, short-haul carrier Wings Air, Thai Lion Air and Batik Air. Around 80% of the group’s fleet is managed by some 42 operating lessors.

Despite Lion Air’s distress, three of its existing lessors — CDB Aviation, ICBC Leasing and Orix Aviation Systems Ltd — have already leased Airbus A320s to the Lion Air’s new Indonesian budget airline, Super Air Jet, according to data from Cirium, a sign of just how desperate lessors are to place idle aircraft in the current environment.

“Some of Lion Air’s lessors are considering taking back their jets from the carrier and remarketing them to other airlines,’’ one of the people said.