November 28, 2008 / 10:56 AM / 10 years ago

WRAPUP 1-Cathay seeks to delay Boeing deliveries, cut costs

* Cathay looking to delay deliveries on Boeing orders

* Cathay defers new cargo terminal, offers unpaid leave

* China to ask airlines to delay aircraft deliveries - report

By Joanne Chiu

HONG KONG, Nov 28 (Reuters) - Cathay Pacific (0293.HK) said on Friday it plans to delay the delivery of its Boeing (BA.N) aircraft, with list prices of about $9.5 billion, while Bejing was reportedly considering asking its airlines to request similar delays as the global crisis hits the region’s carriers.

Cathay Pacific said it would also defer construction of a new cargo terminal in Hong Kong and ask its cabin crews to take unpaid leave as it seeks to cut costs in the face of shrivelling demand.

An unprecedented financial market meltdown hurt consumer sentiment, deepening the woes of airlines which have already suffered from volatile fuel costs.

“This is a very difficult time for our airline and for the aviation industry as a whole, and we cannot see light at the end of the tunnel at this point,” Chief Executive Tony Tyler told reporters on Friday.

Under Cathay Pacific’s original schedule, the Hong Kong-based airline has orders for about 35 Boeing and will take delivery of around 10 each year in 2009, 2010 and 2011.

“We have suggested to them that we are happy to take a delay of 777 and some freighters,” Tylor said.

According to Boeing’s Website, Cathay has unfilled orders for 10 747-8 Freighters, four 747-ERF Freighters and 21 777-300ER twin engine passenger jets worth a total of almost $9.5 billion at current average list prices.

As Boeing’s two-month machinists’ strike was resolved earlier this month, Cathay Pacific would take the opportunity to negotiate a delay on delivery with Boeing and that would take 60-90 days to work up the plan, chief operating officer John Slosar said.

“There won’t be a huge change and it will be more a push back and move around a little bit,” he added.


The Civil Aviation Administration of China (CAAC) is preparing to ask carriers to negotiate with aircraft leasing firms and makers, such as Boeing and Airbus EAD.PA, on delaying delivery of new orders, the South China Morning Post reported on Friday.

“A meeting has been called by CAAC at the beginning of next month to discuss an adjustment of the delivery schedule,” it quoted Xiamen Airlines general manager Hu Bin as saying.

“The market is flooded with excess supply, resulting in ruthless price cuts in air fares and shrinking sales,” Hu said.

But Air China (0753.HK), the country’s largest airline by market value, said it had received no such notice.

Huang Bin, secretary of the board of Air China told Reuters his company had no immediate plan for a delay and was on schedule to receive 23 aircraft, including Airbus A320 and Boeing B737-800, next year.

“Apart from the delay in delivering Boeing 787 due to its own reasons, all other (deliveries) remain normal,” Huang Bin, secretary of the board of Air China, told Reuters by telephone.

Boeing had said earlier in November that the first flight of its 787 Dreamliner would be pushed into next year, rather than its target of the end of this year, because of the strike. Concerns about the production delays, airlines’ lack of financing to buy planes and others had send Boeing’s stock to a five-year low recently.


Cathay will also postpone the construction of its HK$4.8 billion ($619 million) new cargo terminal, which will be the third in Hong Kong’s airport, by up to two years. The terminal had its groundbreaking ceremony in September and was originally scheduled to complete construction in the second half of 2011.

Traffic through the world’s biggest international cargo airport slowed 9.2 percent in October, following a 7.5 percent decline in September.

Cathay also said earlier this month that its October cargo volume sank 7.4 percent to 144,466 tonnes, an unusual drop in the traditional peak season for air cargo.

Analysts said the delay of the terminal would ease the cash flow problem of Cathay Pacific, which issued a profit warning this month on the back of potential fuel hedging losses of about $361 million.

The airline will also ask its cabin crews to take unpaid leave of between two weeks to 12 months, park two freighters, to sell or retire five planes and reorganise flight schedule to cut costs. ($1=HK$7.752) (Additional reporting by Timm Hepher in PARIS; Writing by Alison Leung; Editing by Lincoln Feast)

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