Cathay Pacific eyes near term recovery and long term investment; part one: more widebody orders
Cathay Pacific has continued its post-pandemic investment drive by placing another major aircraft order to support its fleet upgrade plans, while in the short term it is working to complete its network and capacity recovery.
The latest order is for Airbus A330neos, fulfilling its need for a mid-size widebody aircraft for both replacement and growth.
This represents its third major aircraft order since the beginning of 2023. The airline has also been investing in other aspects of its product, backed by its return to profitability and the build-up of international services.
While still firmly in the black, profits have come under more pressure in the first half of this year as fares have eased from high levels in 2023 - a phenomenon common to most Asia-Pacific airlines.
Cathay Pacific's capacity increase has been gradual, but it has reached new post-pandemic highs. It is aiming to have 100% of its pre-pandemic flights in the first quarter of 2025, which would require a significant boost from current levels.
One of the main pacing factors is workforce availability. This has caused headaches for Cathay Pacific during its recovery phase, and it still needs more pilots, in particular, to meet its network targets.
However, the airline is adamant that its hiring and training programmes are on track to ensure it has the numbers it needs.
Part one of this analysis focuses on fleet investments, and the second part on its financial, network and capacity recovery.
- Cathay Pacific’s new Airbus A330-900 orders are set for delivery between 2028 and 2031.
- They will mainly be deployed on 3-4 hour flights, but will also be used for long haul.
- Three major aircraft orders make up the bulk of HKD100 billion seven-year investment plan.
- Cathay Pacific’s next order priority will be more widebodies to continue 777 replacement.
A330neos will be able to fill roles across Cathay Pacific's network, as well as replacing medium-haul fleet
In addition to its 30 firm orders for A330-900s, Cathay Pacific has also secured purchase rights for another 30 aircraft. Deliveries are due to begin in 2028 and conclude in 2031.
The order was approved by Swire Pacific and Air China, which collectively hold more than 50% of the airline's voting rights.
In a stock market filing, Cathay Pacific said that the A330neos would "progressively replace [its] existing fleet of mid-size widebody aircraft and enable future growth". Cathay Pacific currently has 43 Airbus A330s in its fleet, including two inactive, according to the CAPA - Centre for Aviation Fleet Database.
Although the new aircraft will primarily be used on short haul routes, they also provide "flexibility to serve longer-haul destinations at a later stage", the airline said.
During a briefing on 7-Aug-2024, Cathay Pacific's Chief Customer and Commercial Officer Lavinia Lau elaborated further on how the A330neos could be used in the network.
These aircraft will be mainly deployed on 3-4 hour flights to destinations in Northeast Asia and Southeast Asia, she said. However, Ms Lau noted that they were capable of flying stage lengths up to eight hours, which also gives the airline the option of flying them to some destinations in Australia or India.
Cathay Pacific's announcement aligns closely with comments about the selection campaign made by CEO Ronald Lam at the IATA annual general meeting in Dubai in Jun-2024.
At that time, Mr Lam said the airline was targetting an aircraft type to fill the gap between Cathay Pacific's narrowbodies and its larger widebodies, and would choose a single model to achieve this.
He said that Cathay Pacific wanted an aircraft versatile enough to fill a wide variety of roles, including short haul and medium haul, and even some long haul flights.
The latest order is the final piece in Cathay Pacific's medium term fleet investment strategy
The A330neo order is the third major aircraft order campaign completed by Cathay Pacific since the pandemic. Last year it placed a major Airbus narrowbody order, and another for A350 freighters.
Cathay Pacific is investing more than HKD$100 billion (USD$13 billion) over the next seven years on its fleet, cabin products, airport lounges, digital initiatives and sustainability efforts. The majority of this spending - which includes the A330neo deal - is on aircraft.
The airline plans to introduce new cabin products on its refreshed Boeing 777-300ERs later this year, on 777-9 deliveries from 2025, and on its existing A330 fleet in 2026.
The Cathay Group - comprising Cathay Pacific and the subsidiaries HK Express and Air Hong Kong - has more than 100 aircraft in its delivery pipeline, with rights to purchase 80 more in the future.
In addition to its three latest orders, Cathay Pacific has 21 Boeing 777-9s due for delivery, from a deal announced in 2013.
The 777-9s are scheduled to begin arriving in 2025, and are intended to add to the airline's long haul and ultra-long haul capacity, and in the longer term replace some of its existing 777 fleet.
Cathay Pacific's next order priority will be for the eventual replacement of the remainder of its 777 fleet, Mr Lam said in Jun-2024. Cathay Pacific currently operates more than 50 777s, according to the CAPA - Centre for Aviation Fleet Database.
This is not an immediate need for Cathay Pacific because its 777-300ERs are still mid-life, Mr Lam noted. However, it is something the airline will address during this decade.
Cathay Pacific has taken delivery of the last of its 48 Airbus A350 orders, so now the 777-9s will be the next widebodies to arrive. Two are due in 2025, although other airlines are expecting their 777-9s to be delayed and this is not out of the question for Cathay Pacific either.
The airline has also reactivated all of the aircraft that were put in long term storage due to COVID-19. The 85th and last of the stored aircraft - an Airbus A330 - was flown from a storage facility in Alice Springs, Australia, to Hong Kong in Jun-2024.
Fleet investments will give Cathay Pacific a good variety of widebody sizes, and highlight its focus on product
The A330neo order appears to be a good choice for Cathay Pacific.
The aircraft will be able to replace A330s on routes within the region, and its improved range will make it more useful on long haul routes too.
This gives Cathay Pacifc more flexibility for its long haul routes, with aircraft of different sizes to match to different markets.
Although its capacity is still some way short of pre-pandemic levels, Cathay Pacific has recognised the importance of ramping up its fleet investment during the recovery phase.
This will ensure that its fleet upgrade efforts continue their momentum, maintaining the high level of passenger product that is one of its competitive advantages.
The three major orders placed since the pandemic also underline the airline's confidence that it can sustain healthy profit levels, and that Hong Kong will resume its role as one of the region's most important aviation hubs.
Having both new Airbus and Boeing aircraft in its widebody fleet will also give Cathay Pacific a broader range of options when it comes time to order for the next phase of its 777 replacements.