Cathay reports 30 percent rise in February cargo tonnage

Cathay reports 30 percent rise in February cargo tonnage

HONG KONG — Cathay Pacific and sister carrier Dragonair carried almost 30 percent more cargo in February than during the same month last year as the Hong Kong-based airlines added capacity to cope with the lunar new year surge in demand.

Both airlines carried 130,467 tons of cargo and mail in February, up 28.8 percent year-over-year, with capacity, measured in available cargo ton kilometres, rising more than 25 percent. The vast majority of cargo is carried by Cathay Pacific.

A Boeing 777 passenger plane can carry more than 30 tons in its below deck belly space, effectively making the widebody aircraft a mini freighter.

The healthy cargo performance comes just two days before Cathay Pacific announces its 2014 annual results, which are expected to be affected by fuel hedging losses of more than $1 billion incurred as the carrier locked in fuel prices higher than the spot rate.

Cathay Pacific general manager cargo sales and marketing Mark Sutch said the high year-over-year tonnage growth reflected the overall improvement in the world’s air cargo markets compared to early 2014, along with extra capacity added by Cathay Pacific in response to the increase in demand.

“February’s figures were spurred by a surge in exports prior to mainland factories shutting down for the Chinese New Year holidays. Demand fell away over the holiday period, as expected, but saw quite a rapid pick-up, particularly on the North American lanes,” he said.

In the first two months of the year, tonnage at Cathay Pacific and Dragonair rose by 19.6 percent against a capacity increase of 16 percent and a 24.5 percent rise in revenue ton kilometres. The cargo and mail load factor rose by 6.2 percentage points to 65.5 percent.

Cathay Pacific releases its 2014 results on Mar. 18 when a financial figure will be allocated to its unfortunate hedging position. Fuel comprises 40 percent of total expenses and many airlines hedge to mitigate the impact of volatile pricing. Get it right when oil prices are on the rise and there are massive savings to be made. But fuel prices fell to six-year lows in the second half of last year, defying all predictions of an increase and savaging hedging positions held by some carriers, including Cathay Pacific.

The International Air Transport Association has forecast jet fuel prices this year will average $71.10 per barrel, cutting $83.6 billion from the airline industry's global fuel bill.

As important as the fuel price is in terms of cost control, managing capacity is critical to achieving yields and improving profitability. Cathay Pacific operates around 150 aircraft in a young all-wide-body fleet that come with significant belly cargo space. A Boeing 777 passenger aircraft can carry up to 30 tonnes below deck on many routes and has been described as a “mini freighter.”

Cathay Pacific has 79 aircraft on firm order for delivery up to 2024, including 48 Airbus A350s and 21 Boeing 777-9Xs.

The efficiency of belly cargo has completely changed the market, said Aviation Capital Group executive vice president and head of airline marketing Andy Mansell. The aircraft leasing specialist said the large passenger planes now fly point to point, rather than to the hubs for onward distribution.

“In the past, the wide body aircraft would fly from hub to hub and smaller planes would transfer the cargo to other destinations, but now these big planes fly direct, and that has changed everything,” he said.

Competition is fierce in the air cargo market, but Mansell said airlines such as Cathay Pacific that have large freighter fleets — with the steady delivery of Boeing 747-8 freighters taking its total number to 26, Cathay is the world’s largest cargo carrier — making it difficult for them to be challenged.

Contact Greg Knowler at gknowler@joc.com and follow him on Twitter: @greg_knowler.