Cathay Pacific’s strong start to the year continued into July when robust growth in its air freight tonnage out of China pushed up cargo revenue and saw the carrier’s throughput for the month increasing by almost 20 percent.
The significant growth comes on the back of solid first half results where the cargo division of Cathay and its sister airline Dragonair reported a 3.4 percent increase in revenue compared to the first six months of 2013, despite overcapacity pressures and a high fuel price.
All the numbers have remained deep in positive territory. The combined cargo and mail tonnage carried by the two Hong Kong-based carriers rose 19.4 percent in July year-over-year. Load factors were up 4.4 percent to 64.7 percent, while capacity, measured in available freight ton kilometers, grew by 12.7 percent. Revenue per flown ton of cargo rose 21 percent.
Mark Sutch, Cathay Pacific general manager cargo sales and marketing, said even after a good second quarter with strong demand, the July tonnage was above expectations.
“Our performance was underpinned by a strong Hong Kong market and a significant surge in shipments out of the main manufacturing centres in mainland China,” he said.
“We operated a full freighter schedule to all points in the Americas in July with good demand in both directions. We operated fewer freighters to Europe than originally planned though we are now making better use of the belly space in our Boeing 777-300ER passenger aircraft.”
The robust January to July figures show that despite an increase in capacity of 11 percent, cargo volume rose by 10 percent and revenue was up 13.4 percent for the seven months year-over-year.
Michael Beer, vice president, Asia Pacific transportation research at Citi Research, said major downside risks for Cathay, and the air cargo industry, included rising fuel prices, specifically an oil shock associated with unrest in the Middle East, declining yields, continued poor airfreight utilization rates, and weaker contribution from its associates. Cathay holds 20percent of Air China and has a joint venture with Air China Cargo.
Cathay Pacific chairman John Slosar also highlighted the issues facing the aviation industry. When announcing the half-year results this week he said the operating environment remained challenging with excess capacity and intense competition keeping yields under pressure.
However, Slosar said Cathay Pacific expects its new freighter fleet and Hong Kong cargo terminal will allow the business to successfully compete in the air cargo market in the long-term. He also painted a rosy picture of Cathay Pacific’s business prospect in the near-term.
“We expect business to be better in the second half of 2014. Our financial position remains strong and will enable us, despite the current difficult trading conditions, to maintain the quality of our products and services and to continue with our long-term strategic investment in the business,” he said.
The buoyant Cathay results were in stark contrast to the first quarter (April-June) earnings of Singapore Airlines, which saw its net profit falling by 70 percent year-over-year. Most of that was a result of weaker passenger business at SIA and its subsidiary carriers.
Cargo yields at Singapore Airlines fell by 5.7 percent in the first quarter of its 2015 year, volume was down 3.5 percent and load factors were a disappointing 62.4 percent.