Fleet changes for Air China Cargo?

Hong Kong-based Cathay Pacific Airways, which reported second-quarter results dragged down by falling air freight demand and a US$39 million loss from its AIR CHINA CARGO (ACC) joint venture, is reviewing fleet options at the jv.

Air China Cargo, the former cargo arm of Air China and now an Air China/Cathay joint venture, currently operates an 11-unit 747-400 freighter fleet, made up of six -400BCFs, three -400Fs and two -400BDSFs. The carrier has reported year-over-year increases in traffic in recent months, but, according to Cathay CEO John Slosar, the fleet is a problem in an era of high fuel costs.

“Old, fuel-inefficient airplanes is a tough business model,” he said in discussing the second half results, adding, “we’ll have to look at that to see what is the right way forward in terms of the fleet.”

The problem, of course, is that freighters that were true profit-generating machines when fuel was cheap can become loss-makers when fuel hits $3 per gallon and their age pushes up maintenance costs. Add in competition from belly-space on the current generation of long-range widebody passenger aircraft, from much more efficient twin-jet freighters like the 777F, and from payload monsters like the 747-8F, and it is increasingly difficult to operate freighter-converted 747-400s profitably. 

Cathay has begun the process of modernizing its own main-deck freight operations, with the addition of six 747-8Fs and retirement of 747-400BCFs. It also has four more 747-8Fs and eight 777Fs on firm order, but how the Air China Cargo Fleet will be made competitive is unknown at this point, Perhaps the recent increases in demand (ACC’s traffic was up 10% in July) will take away some of the urgency, but it sounds as if jv partner Cathay will push for change.

Today’s blog is expanded from the current issue of Cargo Facts Update. Those of you who do not already subscribe to the the monthly printed Cargo Facts newsletter, and its companion the weekly emailed Cargo Facts Update, can click here for more information.