Heavy transit volume gets Cathay terminal off to a strong start

Heavy transit volume gets Cathay terminal off to a strong start

The first year of operation for Cathay Pacific's new terminal was a good one.

HONG KONG — Cathay Pacific’s new air cargo terminal in Hong Kong handled 1.45 million tons during 2014 in its first full year of operation.

Cargo volumes at Cathay Pacific Cargo Terminal (CPCT) — operated by Cathay Pacific Services Limited (CPSL), a wholly owned subsidiary of the carrier — were dominated by transshipment, which comprised 54 percent of the throughput during the year. Imports made up 15 percent of the tonnage and exports 31 percent.

Hong Kong’s hub position has seen the airport making strong gains in the transshipment sector. The airport’s largest terminal, Hong Kong Air Cargo Terminals Ltd. (Hactl), also reported strong growth in transit cargo that saw an almost 27 percent year-over-year increase.

A crucial advantage in providing transshipment services is the ability to quickly transfer cargo from one aircraft to another, and CPSL has pledged to connect transshipment cargo in five hours, or as little as three hours with “prior arrangement.” In a statement, CPSL said consignees could collect inbound cargo within three hours of arrival for passenger flights and five hours for freighters.

The Cathay Pacific subsidiary was formed in January 2008 and was awarded a 20-year franchise by the Hong Kong Airport Authority (HKIA) to design, build and operate a new common air cargo terminal. Cathay Pacific was a Hactl customer and when the carrier moved out in 2013 to its own terminal, it took 1.2 million tons of annual cargo along with it.

Hong Kong airport now has three main cargo terminals — Hactl, CPCT and Asia Airfreight Terminal (AAT). While the AAT figures are not yet available, the HKIA announced that the airport had handled a record total of 4.37 million tons in 2014, an increase of almost 6 percent compared with 2013.

"We expect 4-6 percent growth in passengers, cargo volumes and flight movements this year," said Airport Authority chief executive Fred Lam.

The improving air freight environment is driving an encouraging revival in demand after three consecutive years of declines, said Andrew Herdman, Association of Asia Pacific Airlines (AAPA) director general.

“Air cargo markets experienced a welcome upswing in 2014, with the second half of the year registering 6 percent growth compared to the same period in 2013, following several years of stagnant demand,” he said.

Herdman said the dramatic fall in oil prices has been welcomed by many airlines, although he noted that improved profitability would vary “depending on individual airline hedging policies and their degree of exposure to external debt, given the weaker Asian currencies.”

Cathay Pacific has hedged 57 percent of its 2015 fuel consumption at $99 per barrel while the current price is half that. A spokesman for the airline told analysts late last year that it could book a paper loss of between $51.6 million and $64.5 million for the second half or 2014 as oil prices continued to fall.

Asked if locking in fuel at higher prices would impact the freight sector profitability, Cathay Pacific director of cargo James Woodrow said yield was largely determined by the supply and demand balance in the market.

“Our hedged fuel obviously fixes a portion of our fuel cost, however, ultimately our total all-in yield depends on the overall market situation,” he told JOC.com.

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