Cathay Pacific Airbus A350-900
Taken by Ross Sugrue @irish_spotter35
Cathay Pacific is changing their HK$58 billion order of Boeing 777X which includes its delivery deferrals and switching to the Boeing 787-10s and Boeing 777Ws. The cost for these aircraft are the biggest cost for the airline. However, they haven’t spoke to Boeing about these adjustments.
A Boeing spokesman has stated: “Cathay is a valued and long-standing partner and we will work to continue supporting their fleet and operational requirements. Conversations with our customers are private and as a matter of rule we don’t comment on speculation.”
Cathay order 21 Boeing 777X aircraft in 2013 that were priced at US$377.2 million each before customer discount. At the moment, the same aircraft are US$442.2 million and each Boeing 787-10 costs US$338.4 million. This would save the company a lot of money during these difficult times. Boeing slowed down their production by their testing delays but the situation with the coronavirus hasn’t helped. They have recently cut their Boeing 787 production rates in half from 14 to 7.
Richard Aboulafia who is an analyst at the aviation consulting firm Teal Group stated that: ‘There aren't that many orders for the 777X, and there aren't that many customers. Losing Cathay would be a blow, but given HK's pre-Covid traffic issues, Boeing had probably prepared for this contingency.’ He also believes that airlines deferring or converting their orders will be likely for many.
Cathay Pacific’s traffic volume has collapsed to less than a percent. This was once 100,000 passengers a day. It appears that due to the current circumstance, the airline won’t fully recover until 2023. Since Cathay’s deferral of deliveries is delayed, it looks like their long haul flights will be reduced.
“I am in the camp of the bathtub view, where a rebound to last year's levels will not occur before 2023-2024 – and this assumes we all are able to manage the further spread of the virus,” said Peter Huijbers, of consultancy PH Aviation.
By the start of 2025, Hong Kong’s Airport expansion will be complete. This means that Cathay Pacific will not need to begin renewing their regional aircraft fleet which consists of 50 Airbus A330s, 12 Boeing 777s along with the future role of the Boeing 787.
The airline currently has a fleet of 236 aircraft. They are planning to receive 32 Airbus A321neos and 12 Airbus A350s. However, the deferral and conversion of their Boeing 777X orders has left Mr. Huijbers foreseeing a bright future with their current fleet.
He stated that: ‘In the case of Cathay, the current fleet of environmental friendly A350s as well as the B777 is sufficient to cover that demand for the next few years, and perhaps re-evaluate in three to five years.”
Emirates has recently switched their Boeing 777X aircraft with Boeing 787 aircraft. They have the largest amount of orders for the Boeing 777X with 115. However, this used to be 150. They decided to trade 30 Boeing 777Xs for the equivalent amount of Boeing 787s. It appears that Cathay may follow in the same footsteps. However, with their first delivery expecting to be only 18 months away they could have already paid for 50% of that aircraft.
‘Cathay will do whatever it can to preserve liquidity, which includes delaying or even cancelling aircraft orders,‘ Morningstar equities analyst Ivan Su announced.
Last month, the airline agreed to a deal with BOC Aviation to sell and lease back 6 Boeing 777-300ERs over 15 years. These aircraft have a mean age of 5 years and Cathay will raise US$703.8 million from this transaction.
Along with the reduction of Boeing 787 productions, they have also received many cancellations of the Boeing 737 Max aircraft following two fatal crashes. Bloomberg said that next week during the company’s first quarter earnings, they will announce about their job cuts. There has also been rumours around Emirates cancelling all their Boeing 777-9s. However, this hasn’t been confirmed.
The Boeing 777-9 took its first flight on the 25th of January 2020 after being delayed by a day due to weather conditions. The aircraft took off from Paine Field in Everett and landed in Boeing Field in Seattle 3 hours and 52 minutes later. There has been orders of these aircraft from numerous airlines such as Lufthansa and Etihad Airways. It will be interesting to see what will happen with these orders over the coming months.
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