Hong Kong's Cathay defers delivery of 4 Airbus planes as demand falls

(Reuters) - Hong Kong’s Cathay Pacific Airways Ltd said on Thursday it would defer the delivery of four Airbus SE narrowbodies in 2020 as it cuts capacity to deal with falling demand due to anti-government protests in its home city.

FILE PHOTO: Cathay Pacific Airways planes are seen at the Hong Kong International Airport, China September 6, 2019. Picture taken September 6, 2019. REUTERS/Amr Abdallah Dalsh/File Photo

In addition to delaying the arrival of three A321neos at regional arm Cathay Dragon and one A320neo at budget carrier HK Express, it said it would retire one Boeing Co 777-300ER and one Cathay Dragon A320 earlier than expected.

The airline said on Wednesday the short-term outlook remained “challenging and uncertain” as it lowered its profit guidance for the second time in less than a month.

Months-long anti-government protests paralyzed parts of Hong Kong again on Thursday, forcing school closures and blocking highways and other transport links amid a marked escalation of violence.

Cathay has said it plans to cut capacity by 6-7% in the short term by reducing flight frequencies.

“We believe Cathay is positioning this as a near-term problem only as highlighted by their strategy to cut capacity but not ground/park planes,” Jefferies analyst Andrew Lee said in a note to clients after an analyst briefing on Thursday.

BOCOM International analyst Luya You said management “didn’t rule out more extreme measures - grounding aircraft, severing leases, cancelling orders - if the situation in Hong Kong deteriorates or extends significantly beyond expectations,” she told Reuters. “At present they seem fairly confident that short-term cost measures are enough.”

A Cathay spokeswoman said management explained the short-term capacity cut measures at the briefing but did not raise the prospect of taking more drastic action.

Cathay said last week it planned to allocate half its order for 32 A321neo aircraft to HK Express as it looks to grow in the budget market, but made no mention of any changes to the delivery schedule.

An Airbus spokesman said delivery schedules change from time to time by mutual agreement with customers, declining to provide further details of the timing.

Cathay said in its Thursday statement that unrest in Hong Kong was expected to lead to a small post-acquisition loss for HK Express, which it bought this year from Chinese conglomerate HNA Group for HK$4.93 billion ($629.7 million).

($1 = 7.8295 Hong Kong dollars)

Reporting by Jamie Freed in Sydney; Editing by Stephen Coates and Edwina Gibbs/Emelia Sithole-Matarise