People walk past a photograph of a Cathay Pacific Airways jetliner at Hong Kong International Airport on Chep Lap Kok, a man-made island off western New Territories. Bloomberg News

HONG KONG: Cathay Pacific Airways Ltd (Cx), Asia's fifth largest airline by market value," has already delayed" delivery of some new aircraft and it is currently in talks with two manufacturers to defer delivery of other aircraft, chief executive Tony Tyler said.

Speaking on the sidelines of an international airline meeting in Kuala Lumpur yesterday, Tyler attributed the move to a deepening slump of the global aviation industry.

He said the airline has no plans to trim capacity even if the aviation industry has yet to recover from global economic recession.

The Hong Kong-based carrier currently has around $10.66 billion of new aircraft orders with Airbus in France and Boeing in the US.

Tyler did not specify the precise number of new aircraft the delivery of which is to be deferred.

Some analysts praised Cathay Pacific's move, given difficult prospects ahead for the global aviation industry.

Prudential Brokerage associate director Kingston Lin said deferring new aircraft orders is a cautious strategy that will help Cathay sustain its operation amid sluggish market conditions.

"The airline's previous progressive measures have severely dragged its earnings last year and it is reasonable for a blue-chip company in deficit to be cautious," Lin said.

Lin expects the carrier to book better earnings this year, as the recent increase in oil price would help trim its fuel-hedging losses.

Cathay posted a net loss of HK$8.56 billion in 2008, its first annual lost in 10 years. Of the total, some HK$7.6 billion represented mark-to-market losses on fuel hedging contracts.

Tyler said yesterday that the airline will take the necessary steps to stop its hedging losses if fuel prices move in a very volatile manner.

The airline also plans to purchase put or call options, aside from swap contracts, as to narrow down the impact of fuel-price fluctuations, Tyler added.

Cho Fook-tat, an aviation analyst at Taifook Securities, said the airline's business depends very much on the recovery of the US economy.

"We expect Cathay's earnings to further drop by 15 percent this year," Cho said, "The airline's passenger demand may also record a single-digit fall."

Cho added that Cathay may boost the passenger volume by offering ticket price discounts. However, the airline's first-class passenger volume is unlikely to jump in the short term.

Securities house Nomura International (Hong Kong) recently raised the target price for Cathay's shares to HK$12.25 from HK$11.4, even as it maintained its "buy" recommendation on the stock.

Nomura believes the airline is likely to book fuel-hedging gains, despite the impact of the outbreak of swine flu and 22.4 percent drop in its first quarter revenue.

Moving in line with the 2.28 percent drop in the benchmark Hang Seng Index yesterday, shares in Cathay Pacific Airways fell 3.23 percent, or HK$0.34, to close at HK$10.2.

(HK Edition 06/09/2009 page4)