Cathay Pacific agrees to aircraft delivery delays with Airbus to stem cash drain
The move could cut the Hong Kong-based carrier’s monthly cash losses in half as it struggles to survive the pandemic
Cathay Pacific agreed with Airbus to delay deliveries of aircraft by a maximum of two years in a move that could cut the carrier’s monthly cash losses in half while the coronavirus pandemic slams the aviation industry.
Deliveries of A350-900s and A350-1000s have been deferred to 2020-2023 from 2020-2021, while A321neo deliveries have been pushed back to 2020-2025 from 2020-2023, Cathay said in a prospectus for its HK$11.7 billion (Dh5.51bn) rights issue. The Hong Kong-based carrier also said it’s in advanced negotiations with Boeing to defer deliveries of the 777-9 aircraft.
Cathay has been losing HK$3bn a month recently as the coronavirus outbreak led to a collapse in passenger traffic. The carrier last week said it was set to post a first-half loss of HK$9.9bn, and it has turned to the Hong Kong government for support in a HK$39bn 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 delivery deferrals should produce cash savings in the short-to-medium term, with monthly losses contracting to HK$1.5bn while minimal passenger 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 in Singapore. “The deferral will save quite a bit of cash.”
The International Air Transport Association (Iata) expects the global airline industry to suffer a net loss of $84.3bn (Dh309.38bn) this year.
“If you look at the Iata forecast, it doesn’t expect traffic to normalise until 2024,” Mr Yong said. “It’s not surprising airlines are deferring planes.”
Cathay’s shares rose 0.7 per cent to HK$5.86 as of 11am in Hong Kong on Wednesday. They’ve fallen 42 per cent so far this year.
Cathay has called the Covid-19 crisis the biggest challenge to the aviation industry it has ever witnessed, and it does not 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.
Updated: July 22, 2020 10:07 AM