A350 deferrals continue as airlines reconsider options

Passengers seem to love flying on the A350 and airlines mostly appear happy with its performance. Alas, that doesn’t seem to be enough to keep orders and deliveries growing, at least not as aggressively as Airbus previously assumed they would. Cathay Pacific is the latest carrier to make a move. The Hong Kong-based carrier confirmed an order of 32 A321neo aircraft, previously announced in late August, in a release today. On top of that news, however, comes a shuffling of A350 orders that is more significant, both to Cathay and to the industry at large.

The Hong Kong based carrier is converting six deliveries scheduled for 2019-2020 to the –900 model. This is a similar shift to what United Airlines recently announced and reflects the growing trend across the industr of operating more direct flights to smaller destinations rather than hub-to-hub trunk routes. Cathay is using the A350-900 to launch service from its hub in Hong Kong to Dublin, Brussels and Copenhagen in 2018 while also dropping its Dusseldorf service next Spring.

Cathay also deferred five deliveries of –1000s, initially planned for 2020 to 2021. That’s not a huge delay but it does provide some breathing room for the company to right its operations before taking on the new aircraft and associated costs; Cathay posted its worst 1st half financial performance in more than 20 years.

Read More: United ups its A350 commitment

In addition to Cathay’s deferral United’s new order also pushes deliveries out to the early 2020s and Delta Air Lines is deferring many of its A350 orders out into the next decade. At the same time Emirate CEO Tim Clark indicated that a potential A350/787 order is off the table for now, casting doubts about order announcements at the Dubai Air Show coming up in November. And American Airlines is at the bargaining table, also raising questions about its pending A350 order.

Bloomberg reports that American President Robert Isom told a pilots group that “I don’t like small fleets in an airline our size,” a near verbatim copy of a message delivered by United President (formerly of American) Scott Kirby. In United’s case that led to increasing the order size from 35 to 45 frames. Surely Airbus would be happy with a similar move from American, especially as American has a fleet of 40ish 777-200s that will be ripe for replacement early next decade. Of course, United also used the opportunity to delay deliveries. Presumably Airbus would be less happy about a further deferral from American.

While American also has the option to consider other aircraft types such as the A330neo that seems less likely given the overall fleet and network size. And even if it did choose that the number of aircraft involved still appears to be wrong. Bigger or none makes much more sense. The original order came from a much smaller airline, just like at United. The airlines changed and so did the market. Now the order book must follow.

The shift in order commitments comes as Airbus is finally starting to overcome supply chain issues and smooth its A350 delivery schedule. The airframer was hit by delays from Zodiac, forcing it to slow deliveries to airlines and deliver subpar cabins. Cathay was hit hard by the quality issues and is set to receive replacement seats on the first three aircraft to help address those problems.

This will help the 787 throw off more cash, BCA reach Muilenburg's goal of mid-teen margins https://t.co/diDcdC5KCM via @business $BA

— Julie Johnsson (@juliejohnsson) September 13, 2017

Separately, Boeing is set to increase its production rate on the 787, though that may be more about changing cash flow and margins than it is about sustained long term demand for the type.