Clear The Air News Blog Rotating Header Image

Cathay faces struggle to fill larger cargo holds

South China Morning Post – 18 Nov. 2011

Delivery of 10 freighters, which can carry 16 per cent more, will be delayed and carrier will find it hard to meet bigger volumes amid sluggish demand

Cathay Pacific Airways (SEHK: 0293) is struggling to fill up its cargo space even as its freight capacity is set to increase by 15 to 20 per cent next year.

With the delay in delivery until next year of most of the 10 747-8 freighters it ordered, Cathay will be in the unenviable position of having to fill up even bigger cargo holds – the jumbo 747-8 can hold 16 per cent more than its predecessor B747-400F – even as cargo volume is dwindling amid sluggish demand in Europe and the US. All the new freighters will operate between Hong Kong and North America from next month.

“The worst-case scenario is that we’ll have to park the aircraft, just as we did during the downturn in 2008 and 2009,” Nick Rhodes, cargo director for Cathay, said on the sidelines of the topping out ceremony of its HK$5.5 billion cargo terminal at Chek Lap Kok yesterday.

To help ease the overcapacity, a B747-400F will leave Cathay shortly as part of the four carriers transferred to its cargo joint venture with Air China (SEHK: 0753announcementsnews) earlier this year. Three more freighters will be leased to Air Hong Kong, a joint venture in which Cathay owns a 60 per cent stake.

Still, Cathay’s cargo capacity is expected to rise by up to 20 per cent. Its cargo volume, meanwhile, contracted more than 17.5 per cent year on year last month and load factor – percentage of cargo space occupied – dropped to 66 per cent.

Cathay’s load factor and the cargo division’s profitability would drop next year as a result of weak economic growth in Europe and North America, Rhodes said. “[But] it’s not all bad, imports into Asia, especially for China, is quite strong,” he said.

Cathay is planning new routes to the mainland and India as well as new markets in eastern Europe, and Central and South America to use the additional capacity. It opened a new service to Zaragoza in Spain this month after the rapid growth of retail chain Zara in Asia. It also wants to add more services to Sri Lanka, the garment manufacturing centre for many US fashion brands such as Victoria’s Secret. Intra-Asia trade is seen as a ray of hope amid the uncertainty in the cargo market, given the volume of IT-related cargo flows within the region.

Cathay is also seeking new services into Australia and Mexico via Los Angeles, pending traffic rights talks. It is increasing the five flights a week on its Miami route to seven because of the growth in traffic between Asia and Central and South America.

In the longer term, the International Air Transport Association forecasts global air cargo demand to rise 6 per cent a year in the next decade. Cathay’s capacity in the next three years is to grow 5 per cent to 6 per cent, in line with global forecasts for demand.

The new cargo terminal at Chek Lap Kok, with annual throughput capacity of 2.6 million tonnes, will hire up to 1,800 staff next year. About 1.8 million tonnes of cargo that Cathay, Dragonair and Air Hong Kong carry a year will be moved to the new terminal in phases from Hong Kong Air Cargo Terminals.

charlotte.so@scmp.com

Leave a Reply

Your email address will not be published. Required fields are marked *