Cathay’s cargo revenue falls 10.1%

The Cathay Group had a profitable first half of the year, raking in 43.6 billion HKD ($5.6 billion), a 135% increase in revenue year over year. On the cargo side of its operations, Cathay posted $1.6 billion in revenue, a decline of 10.1% YoY. “Considering the extraordinarily challenging circumstances that Cathay faced during the pandemic, these results represent a significant improvement, and they reflect the growing strength of our business,” Cathay Group Chair Patrick Healy said in today’s H1 earnings press conference. [caption id="attachment_57132694" align="alignleft" width="300"] An aircraft operated by Cathay Pacific Airways Ltd. takes off from Hong Kong International Airport.[/caption] Cathay operates Hong Kong flag carrier Cathay Pacific , HK Express and Cathay Cargo . THE BIG PICTURE: Several airlines reported major revenue increases in H1 2023 and even record-setting second quarters, including Delta Air Lines , United Airlines and American Airlines . “This is not a Cathay Pacific phenomenon; it’s not a Hong Kong phenomenon,” Healy said. “This really is true for global aviation.” The bulk of Cathay’s revenue came from passenger services, which brought in $3.5 billion, a YoY increase of 1,221.3%. This was largely driven by China and Hong Kong’s relaxing of pandemic quarantine restrictions in 2023. BY THE NUMBERS: Even though Cathay’s H1 cargo tonnage increased, its cargo load factor fell, leading to reduced cargo revenue. Cathay also reported: H1 saw 6.1 billion available cargo tonne kilometers, up 117.6% YoY; It carried 651,000 tonnes of cargo, up 23.8% YoY; The cargo load factor was 63.8%, down 12 percentage points YoY; Traffic, measured in cargo revenue tonne kilometers, was 3.9 billion, up 83% YoY; Cargo yield was 35 cents, down 51.7% YoY; and It recorded a profit of $545.6 million, marking Cathay’s first half-year profit in three years. WHAT THEY’RE SAYING: During the pandemic, carriers saw reduced passenger travel and skyrocketing cargo orders. Now, the dynamic has flipped as the market normalizes. “The last few years were really exceptional for cargo,” Chief Customer and Commercial Officer Lavinia Lau said in the earnings press conference. “This year, I think the overall market has normalized. Obviously, demand [is] not as strong as last year.” Lau said Cathay is strongly benefiting from e-commerce originating in the Guangdong-Hong Kong-Macao Greater Bay Area. Still, Cathay is feeling the effects of supply chain challenges affecting carriers globally and reduced demand. “Globally, post-pandemic, the aviation industry has been facing a lot of challenges, in particular [in the] supply chain,” Lau said. “We are seeing people shortages, materials shortages, and that coupled with the really inflationary factors around the world has added to a lot of the cost pressure on all airline operators.” STATE OF PLAY: Despite cargo revenue being down, Healy called the cargo market “robust.” “When you talk about the yield, effectively, for cargo this year being lower than in recent years, it’s extremely important to bear in mind that 2022 and 2021 were just incredibly exceptional in terms of cargo yield,” Healy said. “So, although the yield has come off from those record performances of the last two years, if you compare today’s yield with any normal cargo year, [like] 2019 or earlier, we’re still in a reasonably strong market.” Healy did point to high capacity as harmful to cargo revenue — as have other companies and analysts. “So much more cargo capacity has come back into the market, both within our fleet and within our competitors’ fleets, as a result of passenger capacity returning to normal levels post-pandemic,” Healy said. “That context is important to understand when you point to the low yields that we’re seeing today.” FUTURE LOOK: Chief Operations and Service Delivery Officer Alex McGowan said Cathay is “on track with recruitment” and is growing its workforce in line with company goals. “On the pilot front, we’re well on track with our cadet recruitment,” he said “We’ve secured around 300 people from the 600 that we are looking for this year. And, again, we’ve opened up recruitment to the Chinese mainland for the first time and already have several hundred applicants.” Cathay also intends to transplant workers to Hong Kong for ground work at Hong Kong International Airport (HKG) using Hong Kong’s supplementary labor scheme, which allows employers to import workers at technician level or below to fill employment vacancies. McGowan said Cathay hopes to employ about 1,000 with that scheme. THE BOTTOM LINE: Cathay executives said they are pleased with the company’s H1 performance and believe the company will give Hong Kong an economic boost in the rest of 2023 and beyond. “The Hong Kong international aviation hub has an important role to play in the overall development of the country,” Healy said. “Through the connectivity it provides, the hub supports and facilitates the overall development of Hong Kong. And we’re committed to continuing to play a key role connecting Hong Kong, the Greater Bay Area and the Chinese mainland with the world.” Join Air Cargo Next for its second annual Air Cargo Tech Summit on Sept. 18-19 in Brussels, sponsored by Unisys and Brussels Airport and featuring a fireside chat with Brian Hodges, managing director, American Airlines Cargo. For more details and to register, click here .

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