UPDATE 2-S.Korea's Asiana to cut unprofitable routes, fleet size in revamp bid

* Cash-strapped airline to cut down routes and fleet size - CEO

* Selling off jets to leasing company might be an option - analyst

* Asiana co-CEO quit last week after accounting fiasco, ratings at risk (Adds comments from CEO and analyst, background)

SEOUL, April 1 (Reuters) - South Korea’s cash-strapped Asiana Airlines Inc plans to cut unprofitable routes and the size of its fleet to improve its financial health, Chief Executive Han Chang-soo said in a letter to employees on Monday.

Han’s co-chief executive resigned on Thursday and its debt-ridden parent Kumho Asiana Group sought financial support from its biggest creditor after an accounting fiasco triggered warnings of credit rating downgrades.

He also said the company would sell more assets to secure liquidity, but did not elaborate. The letter, distributed publicly by the airline, did not detail routes to be cut or the resulting size of the fleet.

“I am desperate to create a stable management environment. We need to restore trust through bold innovation,” Han said in the letter.

Analysts say Asiana is expected to reduce maintenance costs by getting rid of planes it has leased.

The carrier currently operates 87 passenger routes with 83 planes, more than half of which are leased aircraft.

Another alternative is to dispose of some of its owned fleet.

“Selling off their jets to leasing companies might be an option for Asiana, but it takes quite some time to conclude deals,” said an analyst at a South Korean brokerage, declining to be identified due to the sensitivity of the matter.

Asiana currently operates six A380 jets, but auctioning those jets may not be plausible as Airbus announced in February it is scrapping production of the A380 superjumbo because customers preferred smaller jets, analysts say.


South Korea’s second-largest carrier has been under pressure to strengthen its balance sheet after its auditor declined to sign off its latest financial report. The auditor’s decision led to a two-day halt in the trading of Asiana shares and the resignation of Park Sam-koo as co-CEO as well as chairman of Kumho Asiana.

The airline group’s main creditor Korea Development Bank has said it plans to work with Asiana to improve its financial structure but has asked the airline to come up with turnaround plans.

Asiana’s 2018 annual operating profit dropped 88.5 percent to 28.2 billion won ($24.88 million), the airline said in a regulatory filing, from 245.6 billion won a year earlier. The airline reported a net loss of 196 billion won last year.

Asiana Airlines will establish a committee tasked with strengthening finances through asset sales, closing unprofitable routes and organisational restructuring, the letter showed.

Asiana shares closed unchanged on Monday, whereas the broader market ended up 1.3 percent. The stock has lost 13.1 percent since March 21, a day before the trading halt began, and hovers near five-month lows. ($1 = 1,133.2500 won)

Reporting by Heekyong Yang and Ju-min Park; Editing by Christopher Cushing and Muralikumar Anantharaman