DESPITE continuing high fuel prices and a drop in turnover (-0.6 per cent), the Cathay Pacific Group returned to a small profit of US$3.09 million in the first six months of 2013, after a loss of $120m in the first half of last year.
But its cargo business has been in an unprecedented serious decline, as the Hong Kong group continued to operate in “a challenging business environment” the company admits.
Cargo suffered badly during the period, slumping by more than five per cent, which contributed to a major re-think of future fleet plans.
“There was improvement in passenger business, but demand in the major air cargo markets – in particular from our main market of Hong Kong – remained weak,” admits a statement.
The cargo business has been affected by weak demand since April 2011. Cathay’s cargo revenue for the first half of 2013 was down by 5.2 per cent to $187m, compared to the 2012 period. Cargo capacity for Cathay [and Dragonair] was down by 1.8 per cent and the load factor dropped by 1.9 per cent to 62.4. Cargo yield dropped by 3.3 per cent.
Accordingly, freighter capacity was cut back in line with demand, Cathay reveals. “We carried more cargo in the bellies of passenger aircraft in order to reduce costs.
“On the plus side, our new cargo terminal at Hong Kong International Airport (HKIA) is expected to be fully operational by the last quarter of 2013, which will reduce costs and improve efficiency in the group’s cargo business,” the statement adds.
With such difficult market conditions, the company re-engineered its future fleet requirements, taking delivery of six new aircraft: two A330-300s, three B777-300ERs – and one B747-8 freighter.
Strategic fleet reductions consisted of four B747-400 passenger aircraft being retired and the group deciding to cut its new cargo fleet ambitions. Cathay and its partners Air China Cargo and Air China will utilise three B747-8 freighters, which are planned for delivery in the second half of this year, but orders for eight B777-200 freighters were cancelled, and a reduced requirement now means there are options to purchase only five B777-200 freighters.
In April of this year, the company took advantage of a brief drop in fuel prices to extend its fuel hedging into 2016.
Cathay Pacific chairman Christopher Pratt says: “While we continued to operate in a difficult environment in the first six months of 2013, it was pleasing to see some improvement in our business.
“We will remain focused on our long-term goals while managing short-term challenges."