Cathay Pacific has had to take drastic action and defer four incoming new Airbus A321neos, as well as retire two other additional aircraft, to help make ends meet. The airline spent a small fortune acquiring a rival and then was rocked by the civil unrest in Hong Kong.
What are the details?
Cathay Pacific is in a difficult situation. They are a fantastic airline with a big fleet of aircraft and subsidiaries (Cathay Dragon and the newly acquired HK Express) and seem to be going strength to strength. Then right after they purchased HK Express, the Hong Kong civil unrest began.
This plummeted tourist numbers and dropped off business flights to the country. Not to mention protesters physically shutting down the airport, resulted in a massive fall of business for the airline. Whilst other airlines have been affected, only Cathay Pacific flies nearly every route to Hong Kong (as its their hub airport) thus doubling down its problems for every route it has.
So with the funds spent on that new airline acquisition, and the profits not returning thanks to a turbulent climate, Cathay Pacific has decided to defer four orders from Airbus over the near future, according to the South China Morning Post.
Is this a good move by the airline?
The way it works is that an airline doesn’t have to pay more than a deposit until the new aircraft are delivered from Boeing or Airbus. Thus they can delay the delivery of this aircraft to save on cash (and presumably, the aircraft under construction gets assigned to another carrier, or another airline gets Cathays slot in the production queue).
Deferring an aircraft because you don’t have the funds right now is a bit of a catch 22 situation.
Without the aircraft, you can’t run routes. Without the routes, you can’t earn money. Without the money, you can’t pay off the aircraft. Cathay Pacific has taken away a chance for them to start earning some important revenue and hopes that they will be able to get through this trouble to pick them up later.
Cathay Pacific has also decided to speed up the retirement of one of its Boeing 777 aircraft. This will put them at even more of a disadvantage, but will also mean they will save more money that would have been spent on maintenance and fuel.
But it is important to remember that Cathay Pacific’s main source of business is the local Hong Kong population. Dispite the unrest, there are still eight million people in the city who will want to have access to a home-grown carrier. Cathay Pacific will survive this and likely come out of this stronger than ever.
What do you think? Let us know in the comments down below if you think that Cathay Pacific should have deferred the order.