Cathay Pacific is in talks with Boeing and Airbus over possible deferral of aircraft deliveries this year, as the coronavirus outbreak leaves an impact on its fiscal performance.
At a briefing after Cathay released its annual results for 2019, chief operations and services delivery officer Greg Hughes confirmed that discussions were still continuing.
On the “prudent” move, Hughes adds: “We are not yet at a point in time concluding those discussions. We don’t yet have formal redelivery dates for when those aircraft will be delivered to us.”
Cathay Pacific Group was due to take delivery of 17 Airbus aircraft this year. Seven A350s were to go to Cathay, six A321neos to Cathay Dragon, and another four A320neos to low-cost unit HK Express. The aircraft will be a mix of owned and leased types, Cathay states.
Last November, the airline said it was delaying the delivery of the 10 narrowbodies slated for this year. It also brought forward the retirement of a Boeing 777-300ER last year, amid falling demand.
Hughes adds that the group is “engaging all major vendors [particularly] those with whom we’ve large capital programmes with large capital outlays this year and next”, discussing relief packages in the form of deferrals and discounts to help the carrier conserve cash.
Chairman Patrick Healy adds: “Cathay Pacific is a very good customer when times are good, but we expect all our vendors and business partners to come to the table now, when we need them to.”
Healy adds that the carrier is speaking with the Airport Authority of Hong Kong with regard to relief measures, which he says must be “commensurate with the scale of the challenge we currently face”.
Airport Authority of Hong Kong, which runs Cathay’s hub, unveiled a HK$1.6 billion ($206 million) relief package to help the industry through the crisis, including rental concessions as well as reduction or waiver of fees.
Healy says that, while the carrier welcomes the “limited” relief, it believes the measures are ”not sufficient” and do not “accurately reflect” the size of the pressures.
Cathay is forecasting a “substantial loss” for the first half of this year, after it was hit by a collapse in travel demand following the outbreak. It cut capacity by 30% for February, and 65% for March and April, and has grounded the equivalent of more than 140 aircraft.
Healy warns that more cuts could come in May, depending on how the crisis unfolds. “Now the situation…is literally is changing day by day. The scale of the challenge is unprecedented,” he says. “We have a base forecast we’re working [with] which anticipates continued cuts through the first half of the year.”
The group expects a rebound in the second half of the year, although Healy points out that, given the “extremely dynamic situation”, developments are difficult to predict.
For the year ended 31 December 2019, Cathay reported an operating profit of HK$3.4 billion, a dip of 4.3% year-on-year, following a worse-than-expected second-half result that was affected by political unrest in the territory.
