Cathay cargo volume up, revenue down in 2015

Cathay Pacific Airways’ cargo business saw the same top-line declines reported by many other carriers, as falling fuel surcharges led to a 9.0% drop in cargo revenue to US$3.0 billion. Cathay did not release separate operating income data for its cargo division, but given that cargo traffic for the year was up 5.4% to 10.58 billion RTKs, and that fuel surcharges are (in theory, at least) a pass-through cost, we suspect that cargo did make a positive contribution to the carrier’s bottom line. (And speaking of the bottom line, Cathay said net income for the year was up 90.5% to US$772 million.)

If you are in learning more about Cathay’s cargo operations, register now to join us at Cargo Facts Asia 2016, where the carrier’s General Manager, Cargo Sales & Marketing, Mark Sutch will take part in a discussion of air freight trends in the Asia Pacific region. Cargo Facts Asia will take place in Hong Kong, 19 – 20 April. To register, or for more information, go to www.cargofactsasia.com.

Cathay may not have released operating income data for its cargo business, but it did offer an extensive point-by-point commentary on many other aspects of its cargo performance in 2015. We include that commentary below, and also, since one of the items discussed is the performance of the new Cathay Pacific Cargo Terminal, we end this post with a video showing the terminal’s operation.

• Cargo profits in 2015 benefited from low fuel prices. Low fuel prices meant lower fuel surcharges. This adversely affected revenue and yield. Low fuel prices also meant more market capacity. This also adversely affected yield. So did the depreciation of some currencies.

• We managed capacity in line with demand. We reduced schedules and made ad hoc cancellations where necessary.

• We carried a higher proportion (57.0%) of total cargo shipments in the bellies of passenger aircraft.

• Demand for cargo shipments from Hong Kong was strong in the first quarter of 2015 but weak from then until the year end peak period. There was no growth in demand for shipments to Europe in 2015.

• Demand for shipments to North America was better than expected and strong on the Indian route.

• Exports of cargo from Shanghai, Chengdu, Chongqing and Zhengzhou, particularly shipments of consumer electronic products to North America, are key sources of cargo revenue. The 2015 revenue from these sources in Hong Kong dollars was adversely affected by the weakness of the Renminbi. Our mail business in Mainland China is growing.

• There was strong demand for shipments of electronic parts and perishable goods from Vietnam.

• There was strong demand for shipments of cargo to India, particularly for infrastructure projects. We introduced a freighter service to Kolkata in March 2015 and increased the frequency of the Delhi service from seven to eight flights per week in March 2015. There was strong growth in demand for shipments of cargo from Bangladesh.

• Demand for shipments of cargo (milk powder to Mainland China, fresh products to Asia generally and chilled meat to the Middle East) from the Southwest Pacific traffic was strong. Demand for shipments to the Southwest Pacific was stable.

• Overcapacity on routes to Europe put heavy downward pressure on yield. We concentrated on shipping pharmaceutical and special products from Europe. The number of our freighter flights to Europe was between seven and nine a week, depending on demand.

• We added two cargo freighter services per week to North America in April 2015. We changed routings so as to increase cargo capacity on the Chicago, Los Angeles and New York routes. We also increased the frequency of the Columbus service from three to four flights a week from October 2015.

• 2015 was the second full year of operations for the Cathay Pacific cargo terminal at Hong Kong International Airport. The terminal handled 1.7 million tonnes of cargo in 2015, an increase of 13% compared to 2014. It serves 12 airlines, including Cathay Pacific, Dragonair and Air Hong Kong.

• In 2015, we introduced a mail scanning and tracking system.

• In 2013, we agreed to sell six Boeing 747-400F freighters to The Boeing Company. Two of these freighters have been delivered, one in November 2014, the other in July 2015. The remaining four freighters will leave the fleet by the end of 2016. We will take delivery of our 14th and final Boeing 747-8F freighter later in 2016.

• Our cargo business has many challenges. We have confidence in its long-term prospects and in Hong Kong’s future as an international air cargo centre.

And here is the promised video: