Cathay Pacific Airways Ltd. will delay deliveries of Airbus SE aircraft by as much as two years, in a move that could cut the carrier’s monthly cash losses in half as the coronavirus pandemic slams the aviation industry.
Deliveries of A350-900s and A350-1000s have been deferred to 2020-2023 from 2020 and 2021, while A321neo deliveries have been pushed back to 2020-2025 from 2020-2023, Cathay said in a prospectus for its HKD11.7 billion ($1.5 billion) rights issue. The Hong Kong-based carrier also said it’s in advanced negotiations with Boeing Co. to defer deliveries of the 777-9 aircraft.
Cathay has been losing as much as HKD3 billion a month recently as the coronavirus outbreak led to a collapse in passenger traffic. The carrier last week warned it was set to post a first-half loss of HKD9.9 billion, and it has turned to the Hong Kong government for support in a HKD39 billion rescue plan.
For the A350-900, Cathay has taken delivery of 22 out of 26 ordered. For the A350-1000, the carrier has taken delivery of 12 out of 20. Cathay also ordered 32 A321neo planes, though no deliveries have been made yet. The airline has orders for 21 Boeing 777X wide-body jets, which is now only expected to enter service in 2022.
Airbus declined to comment on Cathay’s aircraft deferrals. Boeing’s new 777X jet, originally scheduled to debut this year, is likely to miss its revised 2021 deadline, according to the aircraft’s top customer Emirates, which doesn’t expect to receive any of its 777X planes before 2022.
The deferrals in deliveries should produce cash savings in the short-to-medium term, with monthly losses contracting to HKD1.5 billion while minimal passengers services are in place, Cathay said. It didn’t say how many planes are set to be delivered.
“This actually ensures that Cathay will continue to survive,” said Paul Yong, a senior analyst at DBS Bank Ltd. in Singapore. “The deferral will save quite a bit of cash.”
The International Air Transport Association expects the global airline industry to suffer a net loss of $84.3 billion this year.
“If you look at the IATA forecast, it doesn’t expect traffic to normalize until 2024,” Yong said. “It’s not surprising airlines are deferring planes.”
Cathay has called the Covid-19 crisis the biggest challenge to the aviation industry it has ever witnessed, and it doesn’t expect a meaningful recovery for an extended period.
Airbus failed to secure any new aircraft orders in June, its third barren month this year. The manufacturer delivered 36 planes last month, up from 24 in May. Boeing has been hit even harder as the global grounding of the 737 Max has prompted more buyers to walk away. Bloomberg
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