Cathay Pacific sees H1 air cargo load factor improve, but yields slide

An improved cargo load factor at Cathay Pacific and Dragonair was not enough to stop a decline in yield as industry overcapacity and lower fuel surcharges had an effect on the airline group’s first-half performance.
The world’s largest cargo airline group recorded a 2.5% year-on-year decline in first-half revenues of HK$11.4bn, while yields declined by 11.1% on last year to HK$1.93.
It said performance was affected by overcapacity in the industry and added that a “significant reduction in fuel surcharges put downward pressure on yield”.
Lower fuel prices were welcome, but these were partially offset by fuel hedging losses, it said.
On the demand front, the airline group said the increase in air cargo demand, which began in summer 2014, continued during the first few months of 2015, but slackened in the second quarter.
It said traffic to and from North America was strong until around May, assisted in part by maritime backlogs caused by industrial action at major shipping ports on the US west coast which saw an increase in freighter services.
Shipments to Europe were below expectations but from Europe and the South West Pacific there was an increase.
Demand from Mainland China to North America were strong, with exports from the Yangtze River Delta stable, while exports from Chengdu and Zhengzhou fluctuated in line with major shippers’ production schedules.
Its intra-Asia cargo business continued to grow in the first six months of 2015 as production increased in Southeast Asia and exports from Thailand increased as the political situation stabilised.
Capacity in the bellies of its passenger aircraft increased, so it took the decision to stop operating its weekly Bangkok freighter service in May.
Overall, Cathay Pacific and Dragonair recorded an 8% increase in cargo and mail volumes carried to 868,000 tonnes.
Its average load factor improved by 0.9 percentage points to 64.1%.
Cathay Pacific chairman John Slosar said: “The operating environment was generally positive in the first half of 2015. Passenger and cargo demand was generally strong.
“Yield remained under pressure and there is increasing congestion at Hong Kong International Airport. We strongly support the construction of a third runway at the airport and believe that construction should start as soon as possible.
“We think the Airport Authority Hong Kong can, and should, finance the construction itself without burdening airport users unduly with additional charges.
“Airport charges must be competitive if Hong Kong’s aviation, tourism and related industries are to continue to grow.”
Looking ahead, the airline said: "We expect our cargo business to be stable in the second half of 2015. We expect more competition on our transpacific routes but intra-Asia shipments traffic will continue to grow. Market conditions will continue to fluctuate."
The overall airline group recorded a 0.9% year-on-year decrease in revenues during the first half to HK$50.4bn, while profits reached HK$2bn from HK$347m a year earlier.
The improved profits were down to improved demand on the passenger and cargo sides of the business and an improved contribution from subsidiary and associated companies. Air China’s profits were significantly higher, principally as a result of lower fuel prices.
In terms of Cathay Pacific’s freighter fleet, in 2013 it was agreed that six Boeing 747-400F freighters in the Cathay Pacific fleet would be sold back to Boeing.
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.
It also has six 747-400ERF and a 747-400BCF, which is currently parked but will return to service in September, and 13 Boeing 747-8F, with one more due for delivery next year.
Subsidiary Air Hong Kong has 10 Airbus 300-600F and three Boeing 747-400BCF.
Its cargo terminal, which handles cargo for Cathay Pacific, Dragonair, Air Hong Kong and five other airlines, handled more than 800,000 tonnes of cargo in the first six months of 2015, an increase of 17% compared to the same period in 2014.
In terms of route changes, it added two cargo flights per week to North America in April and now operates 37 cargo flights per week to North America.
It also changed routings in order to increase cargo capacity on the Chicago, Los Angeles and New York routes.

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