Biggest Airbus A350 loses more orders as Cathay becomes latest to opt for smaller sibling

Bloomberg

Airbus SE’s newest wide-body jet lost more orders as Cathay Pacific Airways Ltd. switched a contract for six A350-1000s to the smaller -900 variant and deferred delivery of five more by a year.

The model switch, announced by Asia’s biggest carrier on Wednesday, follows a decision last week at United Airlines to swap an order for 35 A350-1000s to 45 -900s, a move that increased the overall value of the deal but took a large bite out of the bigger jet’s backlog.

The Cathay decision narrows the order book for the 366-seat A350-1000 to 171 aircraft, based on the plane maker’s latest data, while lifting the backlog for the 325-berth -900 to 679 planes. The larger jetliner is falling out of favor as carriers around the world rein in capacity expansion to ease pressure on fares, while United Chief Financial Officer Andrew Levy said the -1000 is also too close in size to the largest Boeing Co. 777 model.

The order revisions suggest that the sweet-spot for twin-engine wide-body orders remains in the 250-350 seat range at a time of excess capacity and with the low oil price making it possible for carriers to put off fleet renewal and upgrades, aerospace consultant Richard Aboulafia said.

Cathay Pacific didn’t give a reason for the A350 flip, announced as part of an order for 32 A321neo planes, saying only that the move would save it $288 million. The Hong Kong carrier has altered course on the A350 before, having ordered 30 -900s in 2010 before two years later switching 16 to -1000s and placing a separate $3.3 billion order for 10 more of the larger aircraft.

All told, Cathay is now due to take 26 -900s — of which 16 have been handed over — and 20 -1000s. The five deferred -1000s will be pushed back by a year to arrive from 2021.

Airbus said that the A350-1000 is complementary to the -900 and part of a successful family that has accrued 848 firm orders from 45 customers spanning seven years of production. Switches between models aren’t a major issue since all stations on the A350 final assembly line can accommodate both models, as can tooling and personnel, spokesman Stefan Schaffrath said in an email. He added that past experience shows that aircraft sizes within a model series increase over time and that Airbus is “very bullish” about the A350 lineup.

The fortunes of the A350-1000, which had its maiden flight on Nov. 24. 2016, are stuttering even before its first delivery, scheduled to be to Qatar Airways before the end of this year.

Qatar Air is also the largest customer for the plane, with 37 on order. United was set to be the second-biggest operator before its exit, leaving Abu Dhabi’s Etihad Airways PJSC ranked next on 22 aircraft, though the Persian Gulf company is reviewing its business model after a $1.87 billion loss in 2016 and bankruptcy filings at two carriers in which it held stakes.

Cathay’s remaining 20 orders will make it the No. 3 customer, followed by IAG SA’s British Airways and Iran Air, which are scheduled to take 18 and 16 aircraft, respectively. Dubai-based Emirates was also a major -1000 buyer with 20 orders before it scrapped the deal in 2014, along with one for 50 -900s.

Airbus abandoned the smallest A350-800 variant, which would have carried 280 people, in 2014 as airlines embraced bigger twinjets. As recently as January the company said it was stepping up work on a stretched version of the -1000 carrying 396 people in three classes in order to challenge the sales success of the biggest version of the Boeing Co. 777X series due at the end of the decade. It has since shelved that plan.

The European manufacturer will be anxious that the A350’s travails stop with the -1000; as part of United’s restructured deal the handover of the smaller -900s won’t now begin until 2022, years later than planned. At the same time the retention of the order earmarks the A350 as a preferred replacement for the current generation 777, for which United was the launch customer in 1995, with Boeing yet to secure a North American contract for the 777X.

Delta Air Lines Inc. also said in May it would defer 10 orders for the A350-900 due in 2019 and 2020 by two to three years and instead take a stretched version of Airbus’s A320 single-aisle workhorse in the near term, while American Airlines Group Inc. has postponed deliveries of 22 -900s.