As a cash preservation measure, Hong Kong’s Cathay Pacific revealed today that it had signed an agreement with Airbus to defer deliveries of its A350-900s, A350-1000s, and A321neos. The airline is in advanced negotiations to delay the order of its Boeing 777-9s as well.
In its official prospectus sent to Simple Flying, the delayed deliveries are expected to “produce cash savings to the Cathay Pacific Group in the short to medium term.”
The prospectus is for the airline’s Rights Issue for $1.5bn with the Hong Kong Stock Exchange. This comes after the Hong Kong government approved a recapitalization plan for the airline, to help raise a total of $5bn in funds.
When will Cathay receive the planes?
According to The Standard, the flag carrier had expected to receive a total of 32 A321neos, 12 A350s and 21 777-9s by 2024.
Instead of receiving the Airbus A350-900s and A350-1000s this year and the next, Cathay Pacific will now receive the planes gradually from 2020-2023. As for delivery of its A321neos, the airline will receive the aircraft starting this year till 2025. The original time frame was for three years, from 2020 to 2023.
.jpg){kind=link}
At one point, Simple Flying reported that Cathay Pacific could choose to swap its impending Boeing 777-9 deliveries for the 787-10, due to its cheaper cost and the fact that the 787-10 is already in service.
However, the airline’s official prospectus makes it clear that the 777-9s are still very much sought after by Cathay.
Profit warning after 99% drop
As an airline solely reliant on cross-border travel, Cathay Pacific has been walloped by travel restrictions worldwide.
According to the prospectus, Cathay Pacific stated,
“Travel restrictions imposed by various governments have led to significantly reduced inbound and outbound passenger traffic for the Cathay Pacific Group and uncertainty over the Cathay Pacific Group’s future prospects and operations.”
Last week, Cathay Pacific disclosed that it is experiencing its most significant loss in history this year. For the six months ended June 2020, the airline suffered a net loss of $1.3bn.
In fact, passenger numbers for the airline dropped 99.1% in June, compared to the previous year. In April, there was a 99.6% drop. Beyond negotiating for delivery deferrals, Cathay has executed many cash preservation measures to lessen the financial blow.
This includes pay cuts for executives and implementing voluntary special leave schemes for its employees and reducing passenger capacity.
Other airlines postponing deliveries
Opting for deferral on deliveries is not an isolated scenario among airlines this year. Many carriers are choosing to do so due to the pandemic, which has severely affected the industry.
By delaying aircraft orders, airlines hope to shoulder the loss of revenue – brought about by low passenger demand.
One such airline is Indian full-service airline, Vistara. This month, the carrier revealed it is in talks with lessors to delay deliveries of Boeing 787s, Dreamliners, and Airbus A320s, due to a decline in travel.
ANA, on the other hand, has confirmed with Airbus to delay delivery of its final A380, albeit for only six months. This means the Japanese carrier will receive the A380 in October this year.
What do you think of Cathay’s move to delay its aircraft orders? Do you think this will help the airline in the long run? Let us know in the comments.