Airlines; Airbus A350 Engine Issues

Cathay has cancelled multiple Airbus A350 flights for pre-cautionary checks after a engine component failure mid-flight. Insiders have told Bloomberg its mainly checking fuel lines into the engine. The manufacturer {RR/ LN Equity} is recovering losses but we wouldn't get complacent on tail risks noting Cathay has said 15 aircraft will require component replacements after inspection. We see 48 A350's under its 230 aircraft (21%) so reasonably high hit-rate on inspection. Positive is 3 have already undergone successful repair and been cleared - points to quick turnaround.

The worries will be if this is the start of another GTF like issue - for the impact of that' see Wizz's latest earnings commentary (it had sizeable exposure at 1/4 of fleet though). Based on Cathay's initial commentary that is not our read (given turnaround repair time drastically different) but we are keeping an eye on it and have included exposure for local issuers below.

A350 (-900 variant manly) exposure from company reports;

• Finnair; 17 of 70 (24%)
• Air-France (only for flagship carrier) 34 of 222 (15%) - 50 orders in place too for group.
• IAG (across group); 38 of 582 (7%)
• Lufthansa (across group) 26 of 721 (3.6%)
• Ryanair; none
• easyJet; none
• Wizz-Air; none