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Scotron12
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Re: Rumor: CX to walk away from 777X order

Thu Apr 16, 2020 9:55 am

PM wrote:
I'm getting deja vu.

For how many years did posters here (including me) insist that the A380 had a future. Just wait and see. Give it time.

We know how that worked out.

Put it another way. Would Boeing launch the 777X today?


I only vaguely remember that the 777X wing production building cost $1Billion. Does anyone know how much in total Boeing has sunk into the 777X development?

Cheers
 
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flee
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Re: Rumor: CX to walk away from 777X order

Thu Apr 16, 2020 10:09 am

PM wrote:
I'm getting deja vu.

For how many years did posters here (including me) insist that the A380 had a future. Just wait and see. Give it time.

We know how that worked out.

Put it another way. Would Boeing launch the 777X today?

Yes, your observation is true right until the Covid-19 pandemic - one of the reasons why airlines can't fill the A380 is because the industry has moved to a high frequency model in addition to more point to point services. That fragmented the number of pax on trunk routes.

As for new aircraft orders and deliveries, widebodies like the B777X/787/A350 will most likely see very slow activity. I believe that if Boeing was considering a B777X launch today the business case will not be good. It will be similar for the MoM aircraft. I think that we may have to wait another 3 to 5 years before we will hear of another new aircraft launch.

Post Covid-19, we will see many airlines shrinking their fleets (and low demand) and it is not possible to sustain high frequencies. Some thin routes might also disappear and in order to contain costs, the hub and spoke model might see a revival. Lets see what the airlines with A380 fleets will do when we recover from Covid-19.

It ain't over till the fat lady sings!
 
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PepeTheFrog
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Re: Rumor: CX to walk away from 777X order

Thu Apr 16, 2020 10:22 am

@flee Also remember that the business case was (partly) based on high fuel prices. Airlines wanted a more fuel efficient aircraft. At launch, fuel was more than $100 per barrel in 2013.

Today fuel prices are low. Even before the Covid-19 pandemic, fuel prices have been low for some time.

The downside of long development times. The market has changed.
Good moaning!
 
Silverstreak
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Re: Rumor: CX to walk away from 777X order

Thu Apr 16, 2020 10:30 am

I wonder at times, if the technology of new airliners has outpaced the actual needs of some airlines. I get the logic of 2 engines over 4 thinking, but really something like COVID-19, should make aircraft makers and the airlines take a breath and think - do we need so many different options? The deserts are full of airliners that never reached their full earning potential and just wait for the crusher.
 
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SEPilot
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Re: Rumor: CX to walk away from 777X order

Thu Apr 16, 2020 10:47 am

VRHNM wrote:
Geoff1947 wrote:
GoSharks wrote:
Since when has CX been considered a Chinese carrier?


Since 1997.


All Hong Kong based carriers are subject to Hong Kong laws and policies which are independent of those in mainland China. Hong Kong based carriers were never subject to the restrictions that mainland carriers have been subjected to (e.g. 1 carrier per route, central aircraft purchasing). Hong Kong and mainland Chinese aircraft are even registered differently so I would say that CX and all other Hong Kong based carriers are Hong Kong carriers rather than 'Chinese', which implies mainland China.

Anyway back on the topic of the 779 and CX... Seeing how uncertain the rebound may be post-Coronavirus, I would think that dropping the 779s would be a good place to start. One factor that might differ from other regions for CX is that the local outbound tourism traffic should rebound relatively quickly as travelling is really ingrained in the culture of Hong Kong people. Of course, whether or not this is a factor large enough to support stronger traffic growth is debatable.

My referring to CX as a Chinese carrier is based on the fact that Hong Kong is part of China, and because of the Coronavirus situation is heavily embargoed by the rest of the world. It has nothing to do with anything else. Hong Kong is not, to the best of my knowledge, exempt from any of the travel bans on China that are currently in place.
The problem with making things foolproof is that fools are so doggone ingenious...Dan Keebler
 
reply1984
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Re: Rumor: CX to walk away from 777X order

Thu Apr 16, 2020 11:07 am

SEPilot wrote:
VRHNM wrote:
Geoff1947 wrote:

Since 1997.


All Hong Kong based carriers are subject to Hong Kong laws and policies which are independent of those in mainland China. Hong Kong based carriers were never subject to the restrictions that mainland carriers have been subjected to (e.g. 1 carrier per route, central aircraft purchasing). Hong Kong and mainland Chinese aircraft are even registered differently so I would say that CX and all other Hong Kong based carriers are Hong Kong carriers rather than 'Chinese', which implies mainland China.

Anyway back on the topic of the 779 and CX... Seeing how uncertain the rebound may be post-Coronavirus, I would think that dropping the 779s would be a good place to start. One factor that might differ from other regions for CX is that the local outbound tourism traffic should rebound relatively quickly as travelling is really ingrained in the culture of Hong Kong people. Of course, whether or not this is a factor large enough to support stronger traffic growth is debatable.

My referring to CX as a Chinese carrier is based on the fact that Hong Kong is part of China, and because of the Coronavirus situation is heavily embargoed by the rest of the world. It has nothing to do with anything else. Hong Kong is not, to the best of my knowledge, exempt from any of the travel bans on China that are currently in place.


Hong Kong is exempt from most of travel bans on China.
 
reply1984
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Re: Rumor: CX to walk away from 777X order

Thu Apr 16, 2020 11:09 am

VSMUT wrote:
reply1984 wrote:
Obviously they will delay all deliveries for sure, but I will say they have more flexibility to adopt wait-and-see approach on their B779 order given to production delay by Boeing. At least now they don't have to rush to cancel their B779 order, while re-negotiation for their A350 order is more urgent.


And as I also noted, re-negotiating aircraft with such short notice is not going to happen. The 7 or so they are receiving this year will almost certainly happen as planned, leaving just 5 to maybe juggle about, if not too late already. They are past the point of "urgent" and into the "point of no return".


This is true when we are in normal world. But now it is pandemic. Let's see what may happen.
 
smartplane
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Re: Rumor: CX to walk away from 777X order

Thu Apr 16, 2020 11:32 am

The stages of purchase can be option, MoU, conditional and unconditional order.

With a new model, yet to fly, there can be a stage between conditional and unconditional, if either OEM (air frame and / or engine) is unwilling / unable to guarantee performance to say within +/- 1-2% of quoted, or promise say +1% within a year of service entry. To avoid the interim stage, OEM's will offer compensation, usually in the form of increased retrospective discounts, or less common, operating subsidies.

At this point in the X development, it would be expected some customers (LH, EK and CX?) would have an unconditional tranche each.

There is no publicity regarding funding requests for, or announcements confirming pre-shipment finance, though traditionally most X customers fund in house, or draw down revolving credit without fanfare used for this purpose. There is no market place activity for post-shipment finance.

When an OEM misses multiple milestones, as is the case with the X, contracts are usually amended. OEM's try to avoid new contracts for obvious reasons, at the same time mitigating compensation, but when this far behind the original development plan.................

How much of a distraction has the MAX been for Boeing? Has Boeing taken it's eye off the ball with X contract updates / replacements, and what impact on the ability of customers to now walk away at minimal cost? Did Boeing not see the need to prioritise X contract updates with the demise of the A380 and no A350 growth model announcement?

If X deliveries had started, the willingness / ability of customers to cancel orders is reduced, as not only are milestone payments lost and legal action initiated, but of much greater value, retrospective credits would not accrue, and those that had already accrued against delivered aircraft would be forfeit and applied against cancelled aircraft under construction.

Every customer is trying to defer / cancel every aircraft currently on order for three reasons: One. They don't need them. 2. They can't finance them. 3. The same aircraft will be cheaper tomorrow as OEM's slash margins, used aircraft values fall, and nearly new aircraft hit the used market.

Hopefully customers recall the ability of Boeing to re-price the X is restricted. X pricing has been capped due to the A380, and to a lesser extent 787. Pre-Covid, Boeing may even have been receptive to reducing order sizes, confident future top-ups post-A380 production ending would be at higher margins.

Unless Boeing is willing to trade A380's and 777's at now inflated values to assist customers into X's, suspending development for 2-3 years must be on the cards.
Last edited by smartplane on Thu Apr 16, 2020 11:48 am, edited 1 time in total.
 
xwb565
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Re: Rumor: CX to walk away from 777X order

Thu Apr 16, 2020 11:46 am

But surely there is something in the way of deposits that CX cannot escape from?
 
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PM
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Re: Rumor: CX to walk away from 777X order

Thu Apr 16, 2020 11:53 am

xwb565 wrote:
But surely there is something in the way of deposits that CX cannot escape from?

Not necessarily. And even if there are, they can leave them in the bank against future Boeing purchases.
 
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BoeingVista
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Re: Rumor: CX to walk away from 777X order

Thu Apr 16, 2020 11:57 am

smartplane wrote:
The stages of purchase can be option, MoU, conditional and unconditional order.

With a new model, yet to fly, there can be a stage between conditional and unconditional, if either OEM (air frame and / or engine) is unwilling / unable to guarantee performance to say within +/- 1-2% of quoted, or promise say +1% within a year of service entry. To avoid the interim stage, OEM's will offer compensation, usually in the form of increased retrospective discounts, or less common, operating subsidies.

At this point in the X development, it would be expected some customers (LH, EK and CX?) would have an unconditional tranche each.

There is no publicity regarding funding requests for, or announcements confirming pre-shipment finance, though traditionally most X customers fund in house, or draw down revolving credit without fanfare used for this purpose. There is no market place activity for post-shipment finance.

When an OEM misses multiple milestones, as is the case with the X, contracts are usually amended. OEM's try to avoid new contracts for obvious reasons, at the same time mitigating compensation, but when this far behind the original development plan.................

How much of a distraction has the MAX been for Boeing? Has Boeing taken it's eye off the ball with X contract updates / replacements, and what impact on the ability of customers to now walk away at minimal cost? Did Boeing not see the need to prioritise X contract updates with the demise of the A380 and no A350 growth model announcement?

If X deliveries had started, the willingness / ability of customers to cancel orders is reduced, as not only are milestone payments lost and legal action initiated, but of much greater value, retrospective credits would not accrue, and those that had already accrued against delivered aircraft would be forfeit and applied against cancelled aircraft under construction.

Every customer is trying to defer / cancel every aircraft currently on order for three reasons: One. They don't need them. 2. They can't finance them. 3. The same aircraft will be cheaper tomorrow as OEM's slash margins, used aircraft values fall, and nearly new aircraft hit the used market.

Hopefully customers recall the ability of Boeing to re-price the X is restricted. X pricing has been capped due to the A380, and to a lesser extent 787. Pre-Covid, Boeing may even have been receptive to reducing order sizes, confident future top-ups post-A380 production ending would be at higher margins.

Unless Boeing is willing to trade A380's and 777's at now inflated values to assist customers into X's, suspending development for 2-3 years must be on the cards.


While all this is maybe true, if you remember the QF 787 saga, they milked Boeing for compensation and then later walked away from the majority of the order, they said, with no penalty because of program delays. How long the aircraft had to be delayed for to trigger this is anybody's guess.
BV
 
StTim
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Re: Rumor: CX to walk away from 777X order

Thu Apr 16, 2020 12:02 pm

I think Boeing must be sweating on the production 777X frames that are already produced - or making their way through production.
 
RickNRoll
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Re: Rumor: CX to walk away from 777X order

Thu Apr 16, 2020 12:16 pm

It's not the same industry anymore. This is only the start of the cancellations for all types of planes from all the airlines.
 
Scotron12
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Re: Rumor: CX to walk away from 777X order

Thu Apr 16, 2020 12:23 pm

StTim wrote:
I think Boeing must be sweating on the production 777X frames that are already produced - or making their way through production.


If this is true that CX is retreating from the 779, LH cannot be far behind?

Spohr has already stated that LH will be a much smaller carrier and that air travel recovery, at least for LH, will take a long time.
 
VSMUT
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Re: Rumor: CX to walk away from 777X order

Thu Apr 16, 2020 12:33 pm

reply1984 wrote:
VSMUT wrote:
reply1984 wrote:
Obviously they will delay all deliveries for sure, but I will say they have more flexibility to adopt wait-and-see approach on their B779 order given to production delay by Boeing. At least now they don't have to rush to cancel their B779 order, while re-negotiation for their A350 order is more urgent.


And as I also noted, re-negotiating aircraft with such short notice is not going to happen. The 7 or so they are receiving this year will almost certainly happen as planned, leaving just 5 to maybe juggle about, if not too late already. They are past the point of "urgent" and into the "point of no return".


This is true when we are in normal world. But now it is pandemic. Let's see what may happen.


Airbus and Boeing are also suffering. Fact is, Airbus has already begun sinking money into the airframes. They aren't going to let that outlay go amiss. What you are suggesting is that Airbus should be happy with essentially providing Cathay with $1 billion USD in credit.

Coronavirus or not, the contract with the manufacturer still stands, just as it would have, had the situation been reversed regarding Boeing and Airbus. The terms of cancelling or deferring an order are clear in those contracts, and this late in the process it comes with hefty penalties. It isn't unlikely that they will be forced to pay almost full price without receiving anything.
 
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lightsaber
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Re: Rumor: CX to walk away from 777X order

Thu Apr 16, 2020 12:34 pm

SEPilot wrote:
Of all the airlines in the world I would list CX as the one under the most pressure. Before the Coronavirus hit they were suffering more than any other from the side effects of the Hong Kong protests. And, being a Chinese carrier, they are also hit harder than most by the Coronavirus situation itself. So it would be surprising if they did NOT make some retrenching moves. The 77X represents a huge investment and an increase in capacity, and may well be a bridge too far at present. The Coronavirus situation will blow over, but nobody knows what ultimately will come out of the Hong Kong protests. I would suspect they would defer rather than cancel the orders at this point. The 77Ws will not stay in the fleet forever.

CX cannot afford new Aircraft. At today's oil pricing, there is little need. I agree with your summary.

Lightsaber
Flu+Covid19 is bad. Consider a flu vaccine, if not for yourself, to protect someone you care about.
 
VSMUT
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Re: Rumor: CX to walk away from 777X order

Thu Apr 16, 2020 12:34 pm

Scotron12 wrote:
StTim wrote:
I think Boeing must be sweating on the production 777X frames that are already produced - or making their way through production.


If this is true that CX is retreating from the 779, LH cannot be far behind?

Spohr has already stated that LH will be a much smaller carrier and that air travel recovery, at least for LH, will take a long time.


There were rumours in another thread that Lufthansa had approached Boeing about converting some 777Xs to 777Fs.
 
sxf24
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Re: Rumor: CX to walk away from 777X order

Thu Apr 16, 2020 12:55 pm

The Seattle Times article had many errors because Dominic Gates used ex-Boeing employees and bloggers as his sources. Here are facts that I know:
- The SLB with BOC Aviation was not for 10 years
- Any 77W lessor would love to extend leases right now and would probably cut rent to do so (this goes for all wide bodies)
- CX can’t unilaterally cancel orders. It has to negotiate with the OEMs.
- Current delays to the 77X are almost certainly excusable because they’re due to the pandemic.
- Customers will almost certainly support Boeing in a longer certification program and slower rate ramp. The alternative is that Boeing moves quickly and forces them to take airplanes in 2021 they don’t want.
 
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BoeingVista
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Re: Rumor: CX to walk away from 777X order

Thu Apr 16, 2020 1:17 pm

sxf24 wrote:
The Seattle Times article had many errors because Dominic Gates used ex-Boeing employees and bloggers as his sources. Here are facts that I know:
- The SLB with BOC Aviation was not for 10 years
- Any 77W lessor would love to extend leases right now and would probably cut rent to do so (this goes for all wide bodies)
- CX can’t unilaterally cancel orders. It has to negotiate with the OEMs.
- Current delays to the 77X are almost certainly excusable because they’re due to the pandemic.
- Customers will almost certainly support Boeing in a longer certification program and slower rate ramp.



Current delays to the 77X are almost certainly excusable because they’re due to the pandemic.

Depends if there's a force majeure clause and whats in it, if not Boeing has to perform the contract to time or face the penalties in the contract
BV
 
workhorse
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Re: Rumor: CX to walk away from 777X order

Thu Apr 16, 2020 1:19 pm

The decision to order 779s was very foolhardy from the beginning and keeping this order now would be simply suicidal. They should be BOTH canceling everything they have on order and not renewing expiring leases. Even before the epidemic, CX's future was troubled. Hong Kong's status of Asia's financial hub is over, it's in the middle of the unraveling US-China conflict and CX (rightly or wrongly) is perceived by a significant percentage of its potential customers as taking sides in it. If anything, they should be praying to be able to keep ANY long haul ops in the following years.
 
Exeiowa
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Re: Rumor: CX to walk away from 777X order

Thu Apr 16, 2020 1:42 pm

BoeingVista wrote:
sxf24 wrote:
The Seattle Times article had many errors because Dominic Gates used ex-Boeing employees and bloggers as his sources. Here are facts that I know:
- The SLB with BOC Aviation was not for 10 years
- Any 77W lessor would love to extend leases right now and would probably cut rent to do so (this goes for all wide bodies)
- CX can’t unilaterally cancel orders. It has to negotiate with the OEMs.
- Current delays to the 77X are almost certainly excusable because they’re due to the pandemic.
- Customers will almost certainly support Boeing in a longer certification program and slower rate ramp.



Current delays to the 77X are almost certainly excusable because they’re due to the pandemic.

Depends if there's a force majeure clause and whats in it, if not Boeing has to perform the contract to time or face the penalties in the contract


This could equally apply to an airlines ability to accept an aircraft into service.
 
reply1984
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Re: Rumor: CX to walk away from 777X order

Thu Apr 16, 2020 1:42 pm

VSMUT wrote:
reply1984 wrote:
VSMUT wrote:

And as I also noted, re-negotiating aircraft with such short notice is not going to happen. The 7 or so they are receiving this year will almost certainly happen as planned, leaving just 5 to maybe juggle about, if not too late already. They are past the point of "urgent" and into the "point of no return".


This is true when we are in normal world. But now it is pandemic. Let's see what may happen.


Airbus and Boeing are also suffering. Fact is, Airbus has already begun sinking money into the airframes. They aren't going to let that outlay go amiss. What you are suggesting is that Airbus should be happy with essentially providing Cathay with $1 billion USD in credit.

Coronavirus or not, the contract with the manufacturer still stands, just as it would have, had the situation been reversed regarding Boeing and Airbus. The terms of cancelling or deferring an order are clear in those contracts, and this late in the process it comes with hefty penalties. It isn't unlikely that they will be forced to pay almost full price without receiving anything.


It is true that Airbus and Boeing are suffering, but airlines will not finance manufacturers by receiving planes that airlines don't need...It is true that these terms are in contracts, but it will significantly deteriorate customer relations if manufacturers do not offer any flexibility when every airline is in trouble.

The most likely scenario is that planes are parked at their delivery centers but not yet delivered, and both manufacturers and airlines turn to governments and banks for loans, and wait for the demand to come back.
 
EAARbrat
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Re: Rumor: CX to walk away from 777X order

Thu Apr 16, 2020 1:50 pm

All contracts worth their salt have a Force Majuere clause so walking away may not hold any penalty.
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ShamrockBoi330
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Re: Rumor: CX to walk away from 777X order

Thu Apr 16, 2020 2:31 pm

xwb565 wrote:
Perhaps smartplane can guess the answer for this- what would allow CX to walk away from the 777x? the delays? or a not so firm launch customer contract?


Force majeure clause?
 
FluidFlow
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Re: Rumor: CX to walk away from 777X order

Thu Apr 16, 2020 2:55 pm

It might even be cheaper for CX to just leave the contract one sided and take a hit of less than 4B instead of paying 4B. What is it good for having 21 777X standing around or flying empty. Depending on the costs of cancelling you can calculate how much it would cost to use (or park) the 777X compared to outright paying the penalty.

This whole program seems to end in a staring contest of who cancels the whole thing first. The airlines or Boeing. Can Boeing afford to push the EIS to 2022 or 2023 because no airline wants the 777X beforehand? Can the airlines push it out that much or would it be cheaper to cancel? Can Boeing affort to piss airlines off, and lose potential 787 customers.

This thing will end up in a massive battle over who can take how much loss and who has the most to lose. Forcing airlines to take the frame and then go bust leaves no future customer and cheap 777X on the market that reduce the market for new produced frames. Deferring the deliveries too long will lead to low production rates or halted production that might push the production price over the agreed sales price and every 777X will be sold at loss.

In my opinion no one will win with the 777X and no one will really make money with it. It most probably will be the A380 of the 2020s. A vanity project that never turns profitable, parked in the desert of the UAE.
 
Jetport
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Re: Rumor: CX to walk away from 777X order

Thu Apr 16, 2020 3:48 pm

MrHMSH wrote:
Would be a bit if a downsize, but for a struggling carrier larger isn't better, with the A350 on property already they have the equipment to makes the routes work a little better. If it is true then further down the line we could see a conversion to the 78X (can see Airbus pitching the A330neo heavily though). While not a huge order, it'd still be a sizeable blow to the 777X. While I didn't think the 777X would be a failure at all (just not as successful as the 77W) its future is possibly the most at risk from the virus crisis of the widebodies currently on offer.


Totally disagree, the A330neo is definitely the widebody most likely to die from Covid 19. It would actually be a win-win-win for airlines, Airbus and Boeing. Airlines get the superior 787, Airbus can sell more A350's and put resources to better use, and Boeing can sell more 787's.
 
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MrHMSH
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Re: Rumor: CX to walk away from 777X order

Thu Apr 16, 2020 3:55 pm

Jetport wrote:
MrHMSH wrote:
Would be a bit if a downsize, but for a struggling carrier larger isn't better, with the A350 on property already they have the equipment to makes the routes work a little better. If it is true then further down the line we could see a conversion to the 78X (can see Airbus pitching the A330neo heavily though). While not a huge order, it'd still be a sizeable blow to the 777X. While I didn't think the 777X would be a failure at all (just not as successful as the 77W) its future is possibly the most at risk from the virus crisis of the widebodies currently on offer.


Totally disagree, the A330neo is definitely the widebody most likely to die from Covid 19. It would actually be a win-win-win for airlines, Airbus and Boeing. Airlines get the superior 787, Airbus can sell more A350's and put resources to better use, and Boeing can sell more 787's.


I think the A330neo has a place as a smaller, low capital cost quickly available airframe, or else for some smaller carriers, whose combined order totals will catch up. The A330neo is at least certified and in service already. The 777X has some orders that are at risk to some extent, whether that's a downsize or deferral (LH and CX rumoured, QR and EY possible, even EK may have trouble taking and then filling all their orders, they have already trimmed the order in favour of adding 787s).
 
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flee
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Re: Rumor: CX to walk away from 777X order

Thu Apr 16, 2020 3:59 pm

MrHMSH wrote:
Jetport wrote:
MrHMSH wrote:
Would be a bit if a downsize, but for a struggling carrier larger isn't better, with the A350 on property already they have the equipment to makes the routes work a little better. If it is true then further down the line we could see a conversion to the 78X (can see Airbus pitching the A330neo heavily though). While not a huge order, it'd still be a sizeable blow to the 777X. While I didn't think the 777X would be a failure at all (just not as successful as the 77W) its future is possibly the most at risk from the virus crisis of the widebodies currently on offer.

Totally disagree, the A330neo is definitely the widebody most likely to die from Covid 19. It would actually be a win-win-win for airlines, Airbus and Boeing. Airlines get the superior 787, Airbus can sell more A350's and put resources to better use, and Boeing can sell more 787's.

I think the A330neo has a place as a smaller, low capital cost quickly available airframe, or else for some smaller carriers, whose combined order totals will catch up. The A330neo is at least certified and in service already. The 777X has some orders that are at risk to some extent, whether that's a downsize or deferral (LH and CX rumoured, QR and EY possible, even EK may have trouble taking and then filling all their orders, they have already trimmed the order in favour of adding 787s).

I suspect that if oil prices continue to be low, airlines will just not buy new expensive planes. It is cheaper to extend existing leases for a few more years and kick the CAPEX further down the road.
 
mig17
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Re: Rumor: CX to walk away from 777X order

Thu Apr 16, 2020 4:27 pm

Separately from the Covid, I would like to know since when CX is negociating with Boeing and GE "to walk away" from the -X. Because the -X was in troubles before the virus hit. I would also like to know how much exactly would it cost them, also taking into account Boeing compensation for the pre-Covid delays of the programm?

My guess is since CX is a launch customer from 2013, the deposits should not be so high. And since the aircraft is not qualified yet, most of the order of 21 frames not already in production should still be conditional.
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trex8
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Re: Rumor: CX to walk away from 777X order

Thu Apr 16, 2020 4:38 pm

reply1984 wrote:
BoeingVista wrote:

You guys crack me up, your argument seems to be that there is more compatibility between the 777W and 777-9 than the A350 and the... A350... :rotfl: :rotfl: :rotfl: :rotfl:



They need to train their A330 crew (if there are enough) for A350. It seems that it is much easier to make B77w crew ready for B779.


there's at least one CX pilot who is on a.net regularly who flies A330 and A350 all the time, sometimes same day.
 
trex8
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Re: Rumor: CX to walk away from 777X order

Thu Apr 16, 2020 4:40 pm

sxf24 wrote:
The Seattle Times article had many errors because Dominic Gates used ex-Boeing employees and bloggers as his sources. Here are facts that I know:
- The SLB with BOC Aviation was not for 10 years
- Any 77W lessor would love to extend leases right now and would probably cut rent to do so (this goes for all wide bodies)
- CX can’t unilaterally cancel orders. It has to negotiate with the OEMs.
- Current delays to the 77X are almost certainly excusable because they’re due to the pandemic.
- Customers will almost certainly support Boeing in a longer certification program and slower rate ramp. The alternative is that Boeing moves quickly and forces them to take airplanes in 2021 they don’t want.


the engine delays predate the pandemic
 
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Re: Rumor: CX to walk away from 777X order

Thu Apr 16, 2020 5:04 pm

BoeingVista wrote:
TC957 wrote:
Maybe for the next couple of years or so, yes. Long term, I think it has a future. But with oil at current low prices, the need for more fuel efficient new expensive aircraft may not be as urgent as otherwise hence we will see more mainstream airlines keeping present fleets on extended lease deals.


For it to have a future air travel needs to get to a higher level than today, thats going to need people to have jobs and money, I cant see air travel returning to 2019 level for a decade.

Also Boeing commercial needs to survive and have the x hundred million to certify the aircraft.


A decade for air travel to return to 2019 levels, that is absurd. I think you may be depressed or suffering from some version of cabin fever?

After a 6 to 24 month breather, people who like to travel are going to return to travel as soon as it is safe to do so and globalization will resume. We will be well above 2019 passenger volumes by 2022 or 2023. If the 777-9 cant find a market, I would also assume the global A380 fleet will be retired entirely next year, which is just as unlikely.
 
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Re: Rumor: CX to walk away from 777X order

Thu Apr 16, 2020 5:13 pm

Jetport wrote:
After a 6 to 24 month breather, people who like to travel are going to return to travel as soon as it is safe to do so and globalization will resume. We will be well above 2019 passenger volumes by 2022 or 2023. If the 777-9 cant find a market, I would also assume the global A380 fleet will be retired entirely next year, which is just as unlikely.


Yet not many airline executives share your view about the development of international aviation.
 
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Re: Rumor: CX to walk away from 777X order

Thu Apr 16, 2020 5:15 pm

flee wrote:
MrHMSH wrote:
Jetport wrote:
Totally disagree, the A330neo is definitely the widebody most likely to die from Covid 19. It would actually be a win-win-win for airlines, Airbus and Boeing. Airlines get the superior 787, Airbus can sell more A350's and put resources to better use, and Boeing can sell more 787's.

I think the A330neo has a place as a smaller, low capital cost quickly available airframe, or else for some smaller carriers, whose combined order totals will catch up. The A330neo is at least certified and in service already. The 777X has some orders that are at risk to some extent, whether that's a downsize or deferral (LH and CX rumoured, QR and EY possible, even EK may have trouble taking and then filling all their orders, they have already trimmed the order in favour of adding 787s).

I suspect that if oil prices continue to be low, airlines will just not buy new expensive planes. It is cheaper to extend existing leases for a few more years and kick the CAPEX further down the road.


This would be good news for 77Ws and A333s. The A339 is still probably cheap to acquire though (especially through lessors), and it will naturally have an edge in fuel efficiency, even if it's relatively less important.
 
klakzky123
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Re: Rumor: CX to walk away from 777X order

Thu Apr 16, 2020 5:30 pm

LJ wrote:
Jetport wrote:
After a 6 to 24 month breather, people who like to travel are going to return to travel as soon as it is safe to do so and globalization will resume. We will be well above 2019 passenger volumes by 2022 or 2023. If the 777-9 cant find a market, I would also assume the global A380 fleet will be retired entirely next year, which is just as unlikely.


Yet not many airline executives share your view about the development of international aviation.


Leisure travel will return much faster than business travel. It's also why some have speculated that LCCs will recover faster than legacy carriers (lower cost base and much higher reliance on leisure travel). If 2008 is a guide, we'll see businesses place significant limitations on business travel (and for those that do travel, they'll probably do so in the back of the plane).
 
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Re: Rumor: CX to walk away from 777X order

Thu Apr 16, 2020 5:38 pm

SEPilot wrote:
Of all the airlines in the world I would list CX as the one under the most pressure. Before the Coronavirus hit they were suffering more than any other from the side effects of the Hong Kong protests. And, being a Chinese carrier, they are also hit harder than most by the Coronavirus situation itself. So it would be surprising if they did NOT make some retrenching moves. The 77X represents a huge investment and an increase in capacity, and may well be a bridge too far at present. The Coronavirus situation will blow over, but nobody knows what ultimately will come out of the Hong Kong protests. I would suspect they would defer rather than cancel the orders at this point. The 77Ws will not stay in the fleet forever.

I agree with your post, but I think there are a lot of contenders for airline under the most pressure. I'd rather be CX CEO rather than DY CEO, for instance. That being said, I think CX also has the problem of strong regional competition and a faster decline than desired in people willing to pay for premium services. They kind of have been coasting on their reputation from the glory days. Overly patriotic mainland Chinese actively booking away from them can't be helping.

FluidFlow wrote:
The 777X is by any means not a good choice from Boeing and for airlines. I never knew why it was even developed, especially after the A380 and the 747-8. Boeing shiftet the market with the 787 to light efficient WBs. Airbus countered with the A350 while letting the A380 rightfully die. Now Boeing only had two options: Let the A350 take the upper end of the WB market and keep the lower end with the 787 or build something even bigger on top of the A350 and hope it will be needed.

The result was a heavy, huge aircraft with too much capability on 99% of routes flown. It is build to a market that is tiny and now with the current crisis even smaller. Boeing would have been more than ok with only the 787 in the WB departement and all the money invested into the 777X could have been used to further improve the 787, increase MTOW and Range, or stretch it once more for more capacity. This was no option with the 777X launched because it would have cannibalized even more 777X sales.

It might start with CX but other airlines will follow to deferr or outright cancel 777X orders. There is no more market for it. A few might be build for BA (slot congestion means big aircrafts work) and LH (as they fly every aircraft ever build it seems) and maybe Emirates will also take a few. Still why buy an expensive, heavy and overbuild aircraft if you can almost get two perfect 787s.

I just can not see the reasoning behind it.

I think it's fair to say 77x was a product of its time. The main influence of the 787 wasn't to show the way forward, it was to scare the poop out of the Boeing Board. The road map showed an all new Y3 that would probably have started at 772ER size with 10 abreast and Y and gone past 779, but there was NO appetite for a new clean sheet at the time. An incremental growth of an already successful model was about all that could have been approved at the time.

PM wrote:
I'm getting deja vu.

For how many years did posters here (including me) insist that the A380 had a future. Just wait and see. Give it time.

We know how that worked out.

Put it another way. Would Boeing launch the 777X today?

I'm not sure the analogy works all that well.

A380 was stunted a bit by 9/11 and SARS but it's clear to me at least that COVID is taking down much of the world's economy for a much longer period.

I think 779 has been holding its own relative to its investment till now.

A380 was a much larger investment in terms of cash, time and pride.

A380 was taken down by Airbus's fundamental mistake in predicting the market.

779's major issue is an unprecedented world wide pandemic.
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seahawk
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Re: Rumor: CX to walk away from 777X order

Thu Apr 16, 2020 5:50 pm

sxf24 wrote:
- Current delays to the 77X are almost certainly excusable because they’re due to the pandemic.
.


If this allows Boeing to escape contract clauses regarding a possible delay, it will also allow CX to escape contract clauses for a cancellation of the order.
 
raylee67
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Re: Rumor: CX to walk away from 777X order

Thu Apr 16, 2020 6:15 pm

SEPilot wrote:
Hong Kong is not, to the best of my knowledge, exempt from any of the travel bans on China that are currently in place.


Not true. When travel bans against China were started to put in place in Feb, most of the bans exclude Hong Kong. For example, travel ban on China from US, Singapore, Australia, New Zealand and Indonesia all excluded Hong Kong (and Taiwan and Macau).

The ones that included Hong Kong (and Taiwan and Macau) are Italy, Philippines and Vietnam. Vietnam flipped several times, initially included Hong Kong, and then removed Hong Kong within 24 hrs, and then include it again, and then removed it again. I honestly don't know what was the final verdict for Vietnam.

But most major and large markets treat Hong Kong separately in that ban.
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Re: Rumor: CX to walk away from 777X order

Thu Apr 16, 2020 6:33 pm

Jetport wrote:

After a 6 to 24 month breather, people who like to travel are going to return to travel as soon as it is safe to do so and globalization will resume. We will be well above 2019 passenger volumes by 2022 or 2023. If the 777-9 cant find a market, I would also assume the global A380 fleet will be retired entirely next year, which is just as unlikely.


The question is, where do we start counting that 6-24 mths. Is it 6-24 mths after May 2020? Or is it 6-24 mths after a vaccine comes out (which would be 2022 the earliest)? The growing consensus is that the situation is not going to resolve itself any time soon. While the most severe lock downs will end in a few weeks, the new "normal" or the new "business-as-usual" is not what we remember as-of Jan 2020. Extreme testing and contact tracing will be in place. Some level of social distancing will continue. Sporadic outbreak will happen which result in localized lock downs from time to time. These will not end until most people have some immunity (i.e. after most people in the world has been infected or a vaccine comes out and most people get vaccinated). So disruptions will continue. People will be concern about flying and getting stranded until then. The 6-24 mths look set to start counting only when global immunity sets in.

If we use the Spanish flu as reference, there were three major waves of outbreak (for northern hemisphere): winter 1918, winter 1919 and winter 1920. There was no vaccine at that time. After 1920, it was not that the virus disappeared, it's just that most people have been infected so when they caught the same virus again, it's a mild flu that the body fights off quickly. That would mean we are looking at global immunity in around Apr 2022 if there is no vaccine. 6-24 mths after that would be Oct 2022 to Apr 2024. If that's the timeline you are looking at, then I do think demand for air travel will recover by 2024.

However, while leisure travel recovers, business travel, which is more profitable for the airlines and hotels, is going to suffer permanent reduction. In these 6 months, executives are going to find that 99% of their business continue more-or-less smoothly without any business travels. All those "I have to fly there to meet with XYZ to get this done" discussion in the office before turns out to be bs. The CFOs are going to ask why there are so much travels. Travel budget will get a major axe. Similarly, many companies who maintain office space for everyone will now delightfully find that they don't need office space for everyone to get things done. Personally, I know several international banks in London are already looking at permanently reducing office space. And it's not because of a one-time cost reduction to get thru the pandemic, but a true realization that they actually don't need to have everyone in the office to get things done. Imagine how much a firm can save if it can cut 50% space from their expensive office in Canary Wharf? The next thing they will look at is all those lucrative business class travels by all those VPs.

Going back to CX's 779 order, do remember that the 779 order is mainly to replace the 4-class 77W, so it's premium-seat heavy. The 3-class 77W are replaced by A350-1000 in the original scheme. If CX realizes that premium business travel will suffer permanently, it is not impossible that they find it unnecessary to have so many 4-class 779s. Personally, I do think they still need the 779s, but just not as many. May be 10 of those will do, for a very limited number of selective routes such as LHR, FRA, JFK, LAX and SFO. Most other routes can be dealt with by a 3-class A350-1000 and even with a downsize to A350-900, when the 77Ws retire.
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Re: Rumor: CX to walk away from 777X order

Thu Apr 16, 2020 6:47 pm

Good post, I'll focus on the last part:

raylee67 wrote:
However, while leisure travel recovers, business travel, which is more profitable for the airlines and hotels, is going to suffer permanent reduction. In these 6 months, executives are going to find that 99% of their business continue more-or-less smoothly without any business travels. All those "I have to fly there to meet with XYZ to get this done" discussion in the office before turns out to be bs. The CFOs are going to ask why there are so much travels. Travel budget will get a major axe. Similarly, many companies who maintain office space for everyone will now delightfully find that they don't need office space for everyone to get things done. Personally, I know several international banks in London are already looking at permanently reducing office space. And it's not because of a one-time cost reduction to get thru the pandemic, but a true realization that they actually don't need to have everyone in the office to get things done. Imagine how much a firm can save if it can cut 50% space from their expensive office in Canary Wharf? The next thing they will look at is all those lucrative business class travels by all those VPs.

I think we will also see a snow ball effect.

Many of us casual travelers noticed over the last few years that hotel prices have gone up largely because AirBNB and others have taken a large slice of business away from the traditional hotels. Same thing will happen if business people who pay premiums for rooms leave the market.

Another factor will be more germ/disease phobia. Do you really want to sleep in a room shared time and time again and cleaned by minimum wage workers not being given the time and supplies to do a thorough job? Do you really want to breathe recirculated air on an airplane? Do you really trust the local health department to assure the restaurant kitchen is clean?
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zkojq
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Re: Rumor: CX to walk away from 777X order

Thu Apr 16, 2020 7:02 pm

sxf24 wrote:
Here are facts that I know:
- The SLB with BOC Aviation was not for 10 years


Well how long was it for then?

sxf24 wrote:
- CX can’t unilaterally cancel orders. It has to negotiate with the OEMs.


Is the pretext for this thread not that CX is in these negotiations right now?

FluidFlow wrote:
In my opinion no one will win with the 777X and no one will really make money with it. It most probably will be the A380 of the 2020s. A vanity project that never turns profitable, parked in the desert of the UAE.


I'm hardly a fan of the 777x and my many criticisms of the airplane have received plenty of backlash, but I'm sure it'll work ok for the ME2 - though I do expect both of them to cancel, convert or indefinitely delay a non insubstantial number of frames. The plane was literally designed and optimised for them. For the non ME2 carriers I agree with you. I think COVID 19 is the final nail in the coffin for anyone still hoping for a 777X order from AFKL, KE or JL. Very hard to see TK ordering them also, but I guess there is still some hope? And the 777-8X is as dead as a Dodo.

I also expect that, with the A380 in mind, the 777X will be very difficult to finance. Lessors haven't ordered any and it's hard to see anyone being enthusiastic about Sale and Lease Back when there will be very little market liquidity and likely no secondary market.
Last edited by zkojq on Thu Apr 16, 2020 7:22 pm, edited 1 time in total.
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mig17
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Re: Rumor: CX to walk away from 777X order

Thu Apr 16, 2020 7:21 pm

raylee67 wrote:
Going back to CX's 779 order, do remember that the 779 order is mainly to replace the 4-class 77W, so it's premium-seat heavy. The 3-class 77W are replaced by A350-1000 in the original scheme. If CX realizes that premium business travel will suffer permanently, it is not impossible that they find it unnecessary to have so many 4-class 779s. Personally, I do think they still need the 779s, but just not as many. May be 10 of those will do, for a very limited number of selective routes such as LHR, FRA, JFK, LAX and SFO. Most other routes can be dealt with by a 3-class A350-1000 and even with a downsize to A350-900, when the 77Ws retire.

What a 777-9 can do in terms of payload range, an A35K can also do with less cost and first or heavy prenium business can also be fitted in A350. The cabin space advantage of 777-9 is limited to 2 or 3 rows of eco in a "light config". You do not need a small subfleet of 777-9 when you already have A35K, tou juste need a more prenium config of some frames if the market really justify it.
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JayinKitsap
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Re: Rumor: CX to walk away from 777X order

Thu Apr 16, 2020 7:22 pm

Well back to CX and the 779, the links below add more information to the 'rumor' cited by the OP. I am sure that CX is renegotiating leases and working to stop all further deliveries until further notice. CX is probably due a lot of $ for the 779 delays, but to get that cash will probably require delivery of frames they now do not want. Cancelling as a force majeure case probably kills all of the contract, I doubt it would require compensation by one and a tear up of its duties by the other. A likely scenario will be an indefinite deferral of the orders, with say an 18 month lead time similar to exercised options.

https://onemileatatime.com/cathay-pacific-boeing-777x/

https://www.heraldnet.com/business/boei ... roduction/
 
Ishrion
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Re: Rumor: CX to walk away from 777X order

Thu Apr 16, 2020 7:36 pm

JayinKitsap wrote:
Well back to CX and the 779, the links below add more information to the 'rumor' cited by the OP. I am sure that CX is renegotiating leases and working to stop all further deliveries until further notice. CX is probably due a lot of $ for the 779 delays, but to get that cash will probably require delivery of frames they now do not want. Cancelling as a force majeure case probably kills all of the contract, I doubt it would require compensation by one and a tear up of its duties by the other. A likely scenario will be an indefinite deferral of the orders, with say an 18 month lead time similar to exercised options.

https://onemileatatime.com/cathay-pacific-boeing-777x/

https://www.heraldnet.com/business/boei ... roduction/


Isn't the second link just a copy paste of the original Seattle Times article?
 
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Re: Rumor: CX to walk away from 777X order

Thu Apr 16, 2020 8:51 pm

mig17 wrote:
You do not need a small subfleet of 777-9 when you already have A35K...

Yet three customers ordered both.... Guess they are seeing something you do not see....

Given where we are now at, I'd say both 779 and A35K orders are at high risk of deferment.

It's hard to see an airline wanting either for the next 2-3 years.
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744SPX
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Re: Rumor: CX to walk away from 777X order

Thu Apr 16, 2020 8:59 pm

zkojq wrote:
sxf24 wrote:
And the 777-8X is as dead as a Dodo.




Actually, with the closing of the 748F line, I think the 778 has a bright future as a large freighter, its even possible that in that guise it could outsell the 779...
 
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MoKa777
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Re: Rumor: CX to walk away from 777X order

Thu Apr 16, 2020 9:40 pm

744SPX wrote:
zkojq wrote:
sxf24 wrote:
And the 777-8X is as dead as a Dodo.




Actually, with the closing of the 748F line, I think the 778 has a bright future as a large freighter, its even possible that in that guise it could outsell the 779...


As has been mentioned before on a.net, the 778 makes for a relatively weak freighter compared to the current 77F.

The higher OEW of the 778 coupled with the same MTOW as the current 77F eats into the valuable payload a potential 778F could carry.

Lower fuel burn may save some of that payload but even if this evens payload out between the 77F and 778F, is there any justification (especially with low oil prices expected to last a very, very long time) for the high CAPEX of the 778F?
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mig17
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Re: Rumor: CX to walk away from 777X order

Thu Apr 16, 2020 9:46 pm

Revelation wrote:
mig17 wrote:
You do not need a small subfleet of 777-9 when you already have A35K...

Yet three customers ordered both.... Guess they are seeing something you do not see....

Given where we are now at, I'd say both 779 and A35K orders are at high risk of deferment.

It's hard to see an airline wanting either for the next 2-3 years.

Yes, and from the "rumors", 3 customers are getting cold feet about the -X, not even counting Emirates who already cancelled 35 of them.

The A35K beefed up fast since 2013 and is as capable if not more than the 779 now. Winning the Project Sunrise against 778 proved that.

There are multiple topics on A.net where it has been pointed out that price is in favor of A35K over 779, payload / range is in favor of A35K over 779 and trip cost (lower per flight and similar per seat) are predicted in favor of the A35K over the heavier 779. So yes, the 779 larger cabin offers more potential revenu but you would have to fill it year-round with right yields for 15 years to begin cashing in on the extra investment over an A35K.

The A35K is the size of an 77W or 778. The 779 being a strech of the 77W, you can't say A35K and 779 are in completly different market. I understand that 779 being the larger one now that A380 is gone if you want to monetize cabin volume it seems to be the obvious choice, reality of also being the heavier frame is catching back.

So unless there is something I am not seeing, like what thoses customer saw if you can tell me, yes, an A35K can also be prenium heavy and it can also do all the things a 779 would do just with a few less pax.

In the end, like you said, I am not even sure the market wants in huge numbers frame as large as the 77W in the future, even to replace it.
Last edited by mig17 on Thu Apr 16, 2020 9:53 pm, edited 2 times in total.
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Re: Rumor: CX to walk away from 777X order

Thu Apr 16, 2020 9:47 pm

Silverstreak wrote:
I wonder at times, if the technology of new airliners has outpaced the actual needs of some airlines. I get the logic of 2 engines over 4 thinking, but really something like COVID-19, should make aircraft makers and the airlines take a breath and think - do we need so many different options? The deserts are full of airliners that never reached their full earning potential and just wait for the crusher.


To me, you raise a very valid point.

So much money has been sunk into competing products from the OEMs for an industry that can be paralysed so quickly. Even ignoring a pandemic of this nature (which, in all honesty, is a once in a blue moon thing at most), aviation is very cyclical, dynamic and volatile.

For a long time, many highly knowledgeable members here on a.net have talked about an order bubble. I've long looked at the production rates of both A & B with a raised eyebrow. This situation we find ourselves in (as you say) "should make aircraft makers and the airlines take a breath and think..."
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jfk777
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Re: Rumor: CX to walk away from 777X order

Thu Apr 16, 2020 9:58 pm

Would it be so bad if Cathay switched to the 787-9 for some of the smaller European and North American cities ? The 777-9 could be too much airplane for these times, the 787-9 has proven to be the sweet spot right now. Just something for our Hong Kong friends to consider.

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