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[Rumor] CX considering cancelling 777X order

[Rumor] CX considering cancelling 777X order

Old Apr 16, 20, 11:46 am
  #1  
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[Rumor] CX considering cancelling 777X order

https://simpleflying.com/cathay-pacific-777x-cancel/

"Hong Kong-based airline Cathay Pacific is rumored to be considering the cancelation of its 777X order. Placed in 2013, the order for 21 Boeing 777-9X jets had a total list price of HK$58 billion. Equivalent to US$7.48 billion, adjusting for inflation would put it closer to $8.3 billion in 2020. The airline had plans to fly the aircraft from 2021.According to the Seattle Times, a senior lessor executive is quoted as saying “Unofficially, Cathay is saying it won’t take the 777Xs”. This is somewhat connected to the airline having signed lease extensions of 10 years or more on a dozen 777-300ERs with lessor BOC Aviation.

The senior executive with an aircraft lessor — who asked not to be identified — says the airline is in talks with a different lessor to extend the leases on another 10 777-300ERs for another decade."

I suppose this move makes sense. Fuel prices have dropped way below and with quite a bit of debt still due the 777X isn't worth it anymore. If true, I would expect CX to refurbish the new F, J, PE but keep the rather miserable Y product on the 77Ws. I also wonder if this is an intent to defer deliveries or cancel outright. Is it worth it if they only take, let's say, 10 in the future?
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Old Apr 16, 20, 7:50 pm
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I'm curious what the penalty will be for cancelling the order.. Not sure CX is in the position to pay at the moment if they cancel... I would think the prudent thing to do for now is to delay the order to 2023 or beyond first, when hopefully air travel will have recovered somewhat, or CX in a better financial position to pay any penalty for cancelling...
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Old Apr 16, 20, 8:49 pm
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Perhaps they will had BOC pay it. I guess that they got a heck of a deal on the extensions. Without the extensions BOC would have had a pile of almost worthless chunks of metal.
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Old Apr 16, 20, 9:17 pm
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Originally Posted by TomYoung View Post
Perhaps they will had BOC pay it. I guess that they got a heck of a deal on the extensions. Without the extensions BOC would have had a pile of almost worthless chunks of metal.
Or BOC buys the current order and they lease from BOC
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Old Apr 16, 20, 10:08 pm
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Boeing seeing difficult to delivery 777X on time, CX may convert its order to lease company to keep more cash
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Old Apr 17, 20, 2:06 pm
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I would not be surprised, if it has been Boeing having pulled the plug. They may not have the money to continue with the 777X (ie setup production facility, for only a few airplanes over many years), especially when their biggest 777X customers (EK, LH, CX) obviously no longer have a need for this uber triple.

Consider the 737Max money sink needing huge amounts of money to avoid a shredding of the nearly 1000 already build jets. Larger hardware modifications might be unavoidable, now the software still does not seem to surface for approval.
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Old Apr 17, 20, 2:18 pm
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Honestly, given the current state of Boeing engineering and manufacturing, I'd prefer to fly on the older 777 over any of their newer aircraft, 787 included.
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Old Apr 17, 20, 2:32 pm
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Originally Posted by AJchang View Post
Honestly, given the current state of Boeing engineering and manufacturing, I'd prefer to fly on the older 777 over any of their newer aircraft, 787 included.
Did you ever fly the A350 ? It's silent !

The 777 is a really, unpleasant, vacuum cleaner noise machine. I did never fly the 787, though this airplane seems to get the same noise qualification and the 777X seems to be no better (maybe even worse due to "enhanced" (read: thinner) sound/temperature isolation.

Have a look at the remaining (and previously wind down) CX schedules, whenever feasible, they do fly the A350. Quite likely, because it's a machine much cheaper to operate. Only use the 777, when a slightly larger capacity is needed (PAX as well as Freight).
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Old Apr 17, 20, 5:05 pm
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Originally Posted by Cambo View Post
Did you ever fly the A350 ? It's silent !
I actually haven't yet!

But, Cathay's A350 fleet is one of the reasons why I'll be shifting my spending from Air Canada. After the way Boeing builds the Dreamliner was revealed, I'm just not comfortable flying on the 787 anymore.
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Old Apr 17, 20, 5:45 pm
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On the one overnight trip wife and I had to do on the A350 in the back (tight date to AKL direct, very hard to shake a premium redemption seat out of AM) we only managed four hours of sleep on the way. On 777s in the back we can manage 8 (though that was a fair while ago).
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Old Apr 17, 20, 8:09 pm
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I would not be surprised to learn that CX has cancelled their 777X order. I don't have any idea of the terms of their purchase contract but it would not be beyond the realms of my imagination to find that it had a clause that could be invoked. CX is fighting for its survival, although one would not think so by the number of posters here whinging that someone else was given a bigger apple than them, while neither had an entitlement to any such a gift. What I do find more difficult to understand is why CX is extending leases for up 20 frames for a further 10 years. Years when these frames may have very little value. Only leases for 10 will expire by the end of 2022. The expiry of the next 10 stretch beyond 2025. That does not appear to be an urgent issue on which to expend current management time. I can only imagine that the leasing companies are giving CX something of immediate value as part of a package. Perhaps if CX agrees to extend leases for another 10 years at the current monthly rate the lessors will waive lease payment for the next "X" months. Who knows.
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Old Apr 17, 20, 8:15 pm
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Potentially lessors know there is no market for them if CX gives up the frames so they gave them an offer too good to refuse.

There will be bargains for some savvy airlines. After 9/11 Qantas bought a lot of 737s that were on AAs order book at a good price allowing them to grow to take up the demand created by Ansetts demise. Pretty sure history will repeat itself in some part of the world.
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Old Apr 17, 20, 9:21 pm
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Originally Posted by cx4ever View Post
I suppose this move makes sense.
Actually, it does not.

1. Boeing will not simply cancel an order because the airline says it will not take delivery. CX has placed a substantial amount on this order already. My estimate is about HKD$40 billion based on how close the delivery will be. Boeing will definitely take a portion as penalty and sells the jets again in a deeper discount.

2. Boeing's pricing varies by airlines. Because of such small fleet, CX usually will have to pay more compared to other (i.e. no volume discount). Airbus does not have a comparable model. So if CX decides to order again upon this cancellation, Boeing is going to charge even more.

Bottom line - by canceling this order, unless CX intends to convert to an all-Airbus fleet, there will be some consequences that will cost CX even more than taking deliveries.
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Old Apr 17, 20, 9:39 pm
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But didn’t Boeing said they’ll be late on the 777X due to MAX issues anyway?

I wonder does that give CX any wiggle room.
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Old Apr 17, 20, 9:45 pm
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Originally Posted by AJchang View Post
I actually haven't yet!

But, Cathay's A350 fleet is one of the reasons why I'll be shifting my spending from Air Canada. After the way Boeing builds the Dreamliner was revealed, I'm just not comfortable flying on the 787 anymore.
With CX having moved to 10-across in Y on the 777s, it is always better to fly the A350 if you're stuck in the back. I'm keeping my fingers crossed that CX will continue to use the A350 to CPT (rather than the 777 they use to JNB).
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