Cathay stays in the red, despite continued cargo strength

The Cathay Pacific Group reported a net loss of US$34 million in the first half of 2018, marking an improvement from 2017’s first half when the Hong Kong-based carrier reported a net loss of $261 million as its passenger business struggled to counter increasing competition from airlines based in mainland China. So far this year, the passenger business has improved alongside ongoing strength in the cargo business. Cargo traffic during the first half rose 7.3%, while cargo revenue increased 23.4%.

Despite the increases in revenue and traffic, however, as with many air cargo carriers this year, Cathay faced rising costs that impacted financial results during the first half. The carrier noted in its interim report that fuel is its most significant cost and accounted for 30.1% of total operating costs during the first half. Although Cathay improved fuel efficiency during 2018m fuel costs rose by 7.1% year-over-year.

The Group’s lackluster first half financial performance is a snapshot of longer-term problems at Cathay Pacific and comes on the heels of recent news of significant restructuring plans. As South China Morning Post reported late in July, an internal memo warned staff to prepare for job cuts as part of a consolidation plan in overseas sales, marketing, cargo, and airport-based operations. Cathay’s 2018 interim report indicates the Group is halfway through a three-year “transformation program” designed to make the Group “leaner, more agile, and more effective competitors,” but did not elaborate on consolidation plans.

Turning to the Group’s successful cargo business, we consider a few highlights from the report:

• As noted in the chart above, strong cargo demand during the first half contributed to improved load factors even as capacity increased by 4.1%.
• Trade flows between Asia and Europe and the Americas are becoming more balanced. During the first half, e-commerce shipments from Asia were strong per usual, while exports of machinery and food from Europe and the Americas to Asia increased – thanks in part to cargo moving in passenger bellies on Cathay’s expanded European network.
• Cathay’s cool-chain offerings are becoming more robust. The Group recently added rental agreements with va-Q-tec and Sonoco for their thermal containers, while continuing to offer Envirotainer and CSafe options.
• Cathay added one additional weekly freighter service to Chennai Airport (MAA) in southeast India, pushing up its freighter operations there from six times weekly to daily, and increased its freighter service at Chhatrapati Shivaji Maharaj International Airport (BOM) in Mumbai from twice to three times weekly.
• The Group plans to add additional capacity on certain routes in America during the second half of 2018 to support seasonal demand.

Those interested in learning more about developments in air cargo markets are invited to join us at Cargo Facts Symposium 2018, to be held 10-12 October at the Omni San Diego. For more information, or to register, visit https://www.cargofactssymposium.com/