Market recovery gives solid lift to Cathay’s cargo volume

Market recovery gives solid lift to Cathay’s cargo volume

Volume at Cathay Pacific has been unexpectedly robust following Lunar New Year.

Cathay Pacific has reported soaring air cargo tonnage carried in February and expects a solid March throughput, driven by steadily strengthening global air cargo markets.

The positive February data comes after the Hong Kong-based carrier reported its worst annual result since 2008 as industry fundamentals of overcapacity, weak demand, and intense regional competition turned a $772 million 2015 profit into a $72 million 2016 loss.

Cathay Pacific and regional carrier Cathay Dragon carried 137,674 tonnes of cargo and mail in February, an increase of 17.4 percent compared with the same month in 2016. In the first two months of 2017, the tonnage carried has risen by 9 percent against an increase in capacity of under 1 percent.

The cargo and mail load factor rose by 6.2 percentage points to 64.2 percent in February. Capacity, measured in available cargo-mail tonne kilometres, was up by 1.2 percent, and cargo and mail revenue tonne kilometres, known as RTKs, increased by 1 percent.

Mark Sutch, Cathay Pacific general manager of cargo sales and marketing, said as expected, the first half of February saw volumes significantly affected by the Lunar New Year holiday.

“However, trade in the region was quick to rebound from the middle of the month, which was soon followed by a pick-up in long-haul trade, leading to a full recovery by month-end,” he said in a statement.

“It was encouraging to see that inbound loads from North America and Europe held up throughout — albeit on a reduced operating capacity. Taking into account the changes in the Chinese New Year holiday period this year [the Lunar New Year arrived early], we managed solid tonnage growth, a reflection of the overall strengthening of global air cargo demand.”

Sutch is expecting Cathay to finish the quarter strongly, helped by the February start of a joint venture cargo partnership with Lufthansa Cargo between Hong Kong and Europe. “We predict March to be a busy month with more project shipments in the pipeline and the launch of a number of new consumer products.”

Parallel with container lines, there is a broad optimism beginning to sweep through the air cargo industry with commentary by industry observers taking on a distinctly different tone to most of the statements made last year.

Andrew Herdman, director general of the Association of Asia Pacific Airlines, "The overall picture for the year ahead looks broadly positive, against a backdrop of renewed optimism on global growth prospects and improving consumer and business confidence across sectors.”

Alexandre de Juniac, the International Air Transport Association’s director general and CEO, “The positive forces currently supporting growth are good news.”

De Juniac said in the longer term, the entry into force of the Trade Facilitation Agreement would cut red tape at borders for faster, cheaper, and easier trade. “The onus is now on the industry to seize the opportunity to accelerate the modernization of processes to make air cargo an even more compelling option for shippers.”

A strengthening airline environment will be appreciated not just by loss-making Cathay Pacific. Lufthansa Cargo posted an adjusted loss before interest and tax of 50 million euros ($53.7 million), compared with a 74-million-euro profit a year earlier, on revenue down 11.5 percent at 2.1 billion euros against 2.35 billion euros last year.

Contact Greg Knowler at greg.knowler@ihsmarkit.com and follow him on Twitter: @greg_knowler.