Cathay Pacific May Cancel Boeing 777X Order

Filed Under: Cathay Pacific

Could Cathay Pacific be cancelling their Boeing 777-9 order? The plane was supposed to be the new flagship aircraft for the airline, featuring a new first class. But it looks like that may not be happening anymore…

Airlines are looking to cancel plane orders

While we talk a lot about airlines and hotels struggling in light of the current situation, aircraft manufacturers are arguably in an even worse situation.

When demand recovers, airlines can add capacity pretty quickly. However, it will likely be many years until we see airlines once again ordering new planes, as they work to get into a more financially secure spot after the current situation ends.

The thing is, new aircraft orders are negotiated many years in advance. That means it’s often not easy for airlines to get out of these orders:

  • Sometimes airlines can get out of these orders for some sort of fees, and that may still be cheaper than taking delivery of new planes
  • Sometimes airlines can swap plane orders to smaller aircraft types that are a better fit for a fleet
  • If an airline files for bankruptcy then their obligations may largely be out the window

Boeing sure is in a tough spot

Cathay Pacific was supposed to get 777Xs

The 777X is Boeing’s new flagship aircraft. The plane is currently undergoing testing, and at least until recently, was supposed to be flying commercially by 2021. This is a larger and more fuel efficient version of existing 777s.

Back in 2013, Cathay Pacific ordered 21 Boeing 777-9s. This was supposed to be their new flagship aircraft, and replace some of their older 777s. Cathay Pacific was expected to take delivery of their 777-9s primarily between 2021 and 2024, so these were supposed to join Cathay Pacific’s fleet soon.

As passengers there was a lot to look forward to with these planes. In addition to the 777-9 being an all new plane, Cathay Pacific was expected to debut new first class suites on this plane, and also refresh their business class.

While I love Cathay Pacific’s first class (it’s one of my favorites in the world), I was still really excited to see what they’d come up with.

Cathay Pacific’s 777-300ER first class

Cathay Pacific reconsidering 777-9s?

While there’s nothing official from Boeing or Cathay Pacific yet, the Seattle Times reports on a rumor that Cathay Pacific may be cancelling their 777-9 order.

A senior executive at an aircraft leasing company speaking on background confirmed that:

  • In March Cathay Pacific extended the lease on more than a dozen Boeing 777-300ERs by 10 years
  • Cathay Pacific is in talks with another leasing company to extend the lease on 10 additional Boeing 777-300ERs by 10 years
  • “Unofficially, Cathay is saying it won’t take the 777Xs”

There’s not really any other way to read into this. Airlines are looking to reduce capacity rather than increase capacity right now, so there’s no world in which Cathay Pacific would be extending the leases on existing 777s while also intending to take delivery of many new ones.

What we have no clue of is what the terms would look like on Cathay Pacific cancelling the 777-9 order. That can’t be cheap, especially when they presumably can’t swap it for another aircraft type, since they don’t have any other Boeing aircraft on order.

Cathay Pacific is extending leases on existing 777s

Could the 777X be delayed altogether?

This is pure speculation on my part, but you really have to wonder if production of the 777X will ramp up at all for the time being. At this point they’re still in the testing phase for the plane, and production was supposed to be ramped up significantly in the coming months.

I would have to imagine that most airlines having ordered these (Cathay Pacific, Emirates, Lufthansa, etc.) really don’t want any new planes at the moment. If that’s the case, and if some airlines are going to cancel orders, there’s a point at which you’d assume it would be most efficient to just put off production of the plane for some period of time, until demand recovers.

Emirates has also ordered the Boeing 777X

Bottom line

While nothing has been stated officially yet, Cathay Pacific has extended the lease on at least a dozen 777-300ERs by a decade. That sure points to Cathay Pacific finding a way to get out of their 777-9 obligations, at least for now.

There’s simply no universe in which Cathay Pacific would negotiate lease extensions right now while also intending to take delivery of 21 new planes over the next few years.

Of course I understand why they would make this situation, though as an airline product geek I’m sad to think that Cathay Pacific may not be introducing new cabins anytime soon…

Do you think Cathay Pacific will cancel their 777X order? Do you think production of the plane will be delayed altogether?

Comments
  1. Cathay Pacific’s utmost priority right now is probably survival. The double whammy of the protests and the virus have battered their books. They may even downsize in the medium term

  2. Gol also canceled 34 737 Max and that’s to add to another 75 canceled a few days ago by a leasing company. Boeing is really being hit hard.

  3. @Mauricio I had not heard about Gol canceling those. I wonder if they are going to abandon Miami and Orlando flights now?

  4. @Stuart

    Now that all airlines have way too many aircraft for the foreseeable future, I guess Gol just saw an opportunity to cancel that order, given the fact that with all the delays, they probably can get out of it at no cost. I guess they can use the other 737 to get to Florida.

  5. Yeah, it’s what they were doing as of two months ago. Stopping in Santo Domingo for a refuel. Not sure if that can last long term though. And with demand projected to be weak for a year or two I bet they will just abandon the routes for now. It’s too bad, was looking forward to them shaking up things to Brasil and adding more service to Fortaleza.

  6. This gives Boeing breathing space to cancel the MAX and come up with a proper competitor to the Neo, rather than the aircraft version of a bad facelift. I’m not excited about the 777X either as compared to the A350 it’ll use a lot of old tech. Given how loud the 777 is (even compared to the A330 & A340) I’m pessimistic from a paxex standpoint. They will have thinner insulation to provide more cabin width, and my question is whether this will be detrimental to cabin noise levels.

  7. 777X production is almost certain to be delayed even further… at this point one has to wonder what Skytrax will do with LH’s 5-star rating lol

  8. There’s middle ground between cancelling all orders by all airlines for all planes. That middle ground is a not so good vaccine is released in 2021, a better vaccine in 2022, travel is back to almost normal in 2024/2025.

  9. Boeing are in a huge mess. The a321 is the perfect size aircraft for the 2020s, and many fleets are even offloading relatively new widebodes to get these.

    No commitment to a new Mid sized 757 replacement (even a 757 neo would have been something), no back up plan for the Max design disaster, Clearly still a huge issue.

    And the 777x is an aircraft that like the a380, will probably get relatively few orders outside the Middle East.

  10. If Cathay goes ahead with this like you outlined here Ben, would it make sense for them to install their new cabins in these planes now as long as travel demand is low and their planes are sitting around? That is of course assuming that the seat manufacturers could deliver them within the next 2 years or so until demand picks up enough again that grounding one 777 is hurting the company financially. I assume that Cathay also are in contractual commitments to seat manufacturers and who knows how easily they could get out of those contracts.

  11. @Stuart
    With Gol switching their US partnership from Delta to American, I can easily see them cancelling the routes: AA is strong in both Miami and Orlando, therefore they can simply fly these routes instead of Gol.

  12. BTW Cathay is extending MPC status by one year. Let’s hope it can survive the industry’s dark and long winter…

  13. When stories like this get floated it is done for creating negotiating leverage to extract better deferral terms from the OEM.

  14. @Stuart – Gol used to fly to Miami and Orlando before the MAX came into service, before abandoning it back in 2013. And when they start flying again, the light loads could allow them to fly nonstop.

    Also, while Gol canceled their MAX orders, they already have taken delivery of some, which were flown to MIA and MCO. Are they returning these or keeping them?

  15. Cathay Pacific should cancel their order, survival of their company, any company, is paramount.
    If anything, when they’re back to business as normal, they should look to Airbus as their go to aircraft purchase option.
    Boeing self-inflicted so many problems on itself it’s going to take years to fix itself.

  16. TOLDJA! I’ve been predicting this for months. And it’s not for survival.

    Cathay has overexpanded for years, and every time I flew with them, I’ve felt this has caused a lot of little paxex deteriorations. I hope they’ll use this opportunity to correct course.

    Also, why not standardize to the A350-1000 as a newer 77W-sized plane? That was a missed opportunity. Cathay’s probably just trying to NOT go all-Airbus, and the 777X was the most feasible, logical Boeing product to buy.

  17. If the airline goes bankrupt, the plane order likely becomes an unsecured claim, similar to a general obligation bondholder, which is junior to a secured bank loan. At least typically, plenty of exceptions.

    Lucky, you should look back historically at what happened to points in a BK. I would think they also become an unsecured claim as a minimum but maybe are structured to not even qualify, would be an admin nightmare cashing someone out the value of some small balance. Yeah they probably just go away. But I think most going concern restructurings (the last AA one) keep them in place as is, so as to not hurt their best customers.

    Recoveries for unsecured creditors today would be extremely low… well even secured creditors would take a big hit.

  18. CX/KA should retire 11 regional A333s (B-HLD-HLL, HYB, HYF), 4 A320s (B-HSD, HSG, HSI, HSJ), 3 A321s (B-HTD-HTF), and 7 B773s (B-HNE-HNK), all of which are over 20 years old.
    Some 77Ws with the 2012 Y cabin will leave the fleet (e.g. B-KPC), and possibly some long-haul A333s will go because of reduced demand (e.g. B-HLP-HLS), while J seats from some retired A333 will move to some of the CX long haul A333, and they will be transferred to KA.
    CX could consider this instead of cancelling the 777x order.

Leave a Reply

If you'd like to participate in the discussion, please adhere to our commenting guidelines. Your email address will not be published. Required fields are marked *