Cathay Pacific announced plans to acquire 27 Airbus and Boeing aircraft in agreements worth around USD6.55 billion at list prices (AFP, 09-Mar-2011). The carrier will acquire 15 A330-300s and two A350-900s from Airbus and 10 B777-300ERs from Boeing. The carrier added that all the aircraft would be delivered prior to the end of 2015. Separately, Cathay Pacific stated (09-Mar-2011) full year earnings surged 199.3% year-on-year in 2010 to HKD14.05 billion (USD1.8 billion), the carrier’s best-even annual profit, on robust traffic and gains from asset disposals. The company had forecast a net profit of at least HKD12.5 billion (USD1.6 billion) for 2010, compared with HKD4.69 billion (USD602 million) posted for 2009. Despite the record result, the carrier expressed caution over escalating oil prices for 2011.
Cathay Pacific to purchase 27 new Airbus and Boeing aircraft; reports record profit in 2010
You may also be interested in the following articles...
Cathay Dragon evaluates A320/737 order to upgrade Asia's oldest fleet – if unions allow
It may seem surprising that Asia's oldest aircraft fleet is operated by Cathay Dragon, part of the Cathay Pacific Group that is one of Asia's historically blue-chip, but now challenged, aviation companies. Cathay, according to the South China Morning Post, is midway through an RFP to acquire 23 next-generation narrowbody aircraft from 2019. Meanwhile its local rival HK Express has already received its first A320neo.
Cathay Dragon operates 42 passenger aircraft, including 23 narrowbodies with an average fleet age of 12.6 years. The A330s – including the world's oldest – push average fleet age to 14.5 years, the highest of major Asian airlines. The A320s alone would still be the oldest fleet; Korean Air has the second oldest fleet, but at a younger 9.8 years.
The aircraft order is overdue and Cathay missed an opportunity five to ten years ago to grow a larger footprint in mainland China. Now the Singapore Airlines Group – thanks to narrowbodies and LCCs – serves more Chinese cities than Cathay does in its own backyard. Although it is a buyer's market for new aircraft these are precarious times at Cathay, whose fiery unions lack confidence in management spending and direction. As Cathay restructures it appears that inevitably staff will have to make salary sacrifices, further challenging how to communicate the necessity of long term investments.
Frontier and Spirit Airlines ramp up their fleets to support bullish views on passenger stimulation
ULCCs Frontier and Spirit hold orders for more than 150 Airbus narrowbodies to support the proliferation of the model across the US. Frontier’s fleet is projected to grow by 83% from YE2016 to 2021 – from 66 to 121 aircraft. Spirit’s current fleet forecast shows 46% growth from YE2017 to 2021 – from 108 aircraft to 158 aircraft.
Each airline is taking nuanced approaches to financial management of its fleet. Spirit has opted to purchase some aircraft off lease in order to enlarge its number of owned aircraft, while Frontier, which is just embarking on the process of accessing public markets, will use operating leases as its primary financing vehicle.
The planned growth by each airline reflects conclusions reached by Frontier and Spirit about the opportunities for the ULCC model in the US, despite changing market dynamics – namely a push by large US global network airlines to create pricing segments to compete more effectively with ULCCs. Despite the focus on price matching by larger airlines, Frontier and Spirit remain bullish on the opportunities for stimulation in the US market.