Premium Fleet Review – Cathay Pacific

Cathay only uses widebody aircraft It is focusing on 777 and A350 Airbus and Boeing will compete vigorously for every order Cathay Pacific is a highly regarded airline based out of Hong Kong. Started in 1946, the airline developed a reputation for its fine service levels. Like all airlines, Cathay is facing turbulence from LCC competition and it also has the unusual task of having to manage increasingly congested airports at its home, Hong Kong as well as a key destination in London Heathrow. Cathay has five daily flights to Heathrow plus one to London Gatwick. The following chart lists the airline's fleet since 2000. Because of its home base, the airline has no single-aisle aircraft. Like Singapore Airlines, its fleet is focused on medium and long-hauls. Over the years the fleet has grown steadily. Because the airline only uses widebody aircraft, it only does business with Airbus and Boeing. The following chart shows the breakdown in the fleet by OEM. As the airline acquired Airbus A330s and A340s, the Airbus share rose. But then as the 747-400s started to retire the airline acquired 777-300ERs and these were ordered in greater quantity. This grew Boeing's share of the fleet. In 2016 Cathay had more than twice as many 777-300ERs in service than it ever had 747-400s. The following chart illustrates the evolving model breakdown at Cathay. The blue shows the Boeing fleet. The domination of the 777-300ER is readily apparent. Cathay has shown an appreciation for the A330-300 but not so much for the A340 models. The airline does have a rising interest in the A350, more of which is seen below in the fleet table. The following chart lists the fleet over the years by seat categories. The evolution towards the dominance of the 250-299 seat segment is clear. This reflects the medium haul fleet serving regional Asian markets. As Asian incomes rise, especially in China, Cathay has been able to offer Hong Kong as a destination, and also offer it as a hub to connect to global destinations. Notice how the fleet has also evolved away from the near VLA segment at the high end. Cathay is one of a handful of airlines thought to be a potential A380 operator. The chart illustrates that is probably not the case. This despite the need in the Hong Kong-London market being a frequent example used to justify the logic of an A380. We have been in alignment with this argument. But it does not appear Cathay shares this view, although they have decided to order the largest A350-1000. Next, if we combine the chart above and illustrate the share of the fleet by seat categories, we get the following chart. As we can see the proportion of high capacity has declined rapidly. Cathay appears to have decided that deploying multiple 777-300ERs on long-haul routes serves their business better. This argument is frequently put forward as the preference of business travelers. It does make sense in that business travelers cherish schedule options. But that logic does run into rising capacity constraints at places like Heathrow. Take a look at the following schedule to illustrate our point. Cathay has two flight departing Hong Kong within ten minutes and arriving within 15 minutes. This happens twice in a week, so the push for consolidating two flights into one is not entirely there - yet. But if we include the previous night's 23:55 departure then we see up to three flights withing an hour. So the argument against the A380 is also not watertight. Finally, the table below lists the fleet as at end of 2016 plus the orders. The A350 accounts for nearly 63% of the orders. So Airbus has made headway in the long-haul fleet renewal. Boeing's 787-9 offers some special range capabilities too. Cathay appears to be focusing its future long-haul fleet on range rather than capacity. The fleet is simple compared to most other airlines. The 777-300ERs have a long life at the airline yet. Cathay could still select the 777X. We have seen the airline build much of its recent growth on the 777. On the other hand, if the A350 meets its high expectations, Airbus will get more orders. When the A330 are retired, the A330neo beckons as the perfect replacement.

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