Cathay Pacific Airways is struggling to bolster air cargo volumes even as it expands its service network. But with a major fleet renewal program underway and analysts claiming its freight division is acting as a drag on Group profits, improvement will be needed this year.
     Last month CX expanded its freighter services into Latin America with a thrice-weekly scheduled service to Mexico City from HKIA, increasing the frequency of its service to Guadalajara from two to three freighter flights per week and starting a new freighter service to Columbus, Ohio. The fleet is also being overhauled - CX expects to be operating 14 B747-8Fs by 2016, while some 93 aircraft are due for delivery from 2014 to 2024 to add to or replace its existing fleet of 140 wide-body aircraft.
     But while Cathay is expanding its international freight horizons as new, more efficient, aircraft are delivered, cargo volumes in 2013 disappointed. Uplift fell 5 percent in December, a month in which many airlines and airports reported robust growth. Indeed, CX and Dragonair combined volumes in 2013 were down 1.5% year-on-year despite a 1.7% increase in capacity and the carriers’ much anticipated transfer of operations within HKIA to the Group’s new Cathay Pacific Cargo Terminal (CPCT).
     Further year-on-year declines were registered in January (-1.4%) and February (-2.4%). Cathay Pacific General Manager Cargo Sales & Marketing Mark Sutch (right) said demand had failed to surge pre-Chinese New Year as expected, and the anticipated pick-up after the holiday was also slow. However, there was some sign of recovery in March when tonnage showed a 13.8% increases on the back of an 18.8% increase in capacity measured in available cargo-mail ton kilometers.
     Whether last month’s performance was a blip or a sign that Cathay has turned a corner remains to be seen. But what is clear is that the carrier’s freight performance has been a cause of concern for some time. CX lost volume last year even though total throughput at HKIA climbed 2.4% year on year to reach 4.12 million tons, suggesting a loss of market share at its home hub. CX’s 2013 annual report revealed a 3.6% year-on-year decline in cargo revenue and the airline admitted demand for its cargo services had been weak since April 2011.
     HSBC analysts said earlier this month that CX’s poor cargo performance had capped its strong earnings recovery, which has seen its passenger business outperform its peers in recent quarters.
     The repercussions of another poor year for Cathay’s cargo division, which generates around a fifth of its revenue, will spread further than the airline.
     After investing $760 million in CPCT – which is managed by Group subsidiary Cathay Pacific Services Limited and is designed to offer 2.6 million capacity per annum – the Group can ill afford for its expensive facility, which became fully operational last October, to have idle capacity. Yet without its parent airline delivering substantially more throughput, CPCT will need to win a lot of third party traffic from handling rivals at HKIA to bulk up throughput and provide the Group with a viable return on its investment, an investment made in part to help improve CX’s cargo efficiency and reduce costs in the long term.

     Algernon Yau, Chief Executive Officer at Cathay Pacific Services Limited, is positive on 2014 but reluctant to set specific targets.
     “Cathay Pacific Cargo Terminal has commenced the phase-in operations since February 2013 with a final cut-over successfully completed in October last year,” he told FlyingTypers earlier this year.      “Around 600,000 tons of cargo throughput was handled throughout the year.
     “Since full operations commenced in October, we have been providing tailor-made services to our customers. In view of the full-year effect, I am expecting a surge of tonnage throughput at the Cathay Pacific Cargo Terminal in 2014.”
     Clearly, any such surge through CPCT would further add to the pressure faced by incumbent operators at HKIA in the shape of Asia Airfreight Terminal and Hong Kong Air Cargo Terminals Ltd (HACTL) given that growth in recent years has been slow and annual capacity at HKIA is now a staggering 7.4 million tons.

Other Players

     AAT, the smallest player at HKIA, would not comment on its volume figures in 2013.
Unaudited figures from Bloomberg stated that Hactl saw monthly throughput year-on-year losses hover between 28-40% from September to December as CPCT came on stream and cargo was transferred by Cathay. Hactl is positive that its own service record and the ongoing attraction of HKIA as a gateway to China and other parts of Asia will stand it in good stead.
     Chief Executive Mr. Mark Whitehead told FlyingTypers that the loss of the vast majority of Cathay’s cargo (Hactl will continue to handle Horses and Dangerous Goods for CX) throughput after discounting Cathay tonnage grew 5.5% in 2013.
     He argued the loss of CX throughput had rendered year-on-year tonnage comparisons as “no longer relevant”. He added: “In the short term it is unrealistic to replace the CX tonnage. However, we continued to develop new businesses and extend our services to existing airline customers. In November and December 2013, we were appointed the ground handler by Jun Air and Aurora Airline. In January, Kalita Air became a ‘one-stop-shop’ customer of Hactl.”
     The handler has also been boosting its road feeder links to mainland China via logistics subsidiary Hacis and expects to benefit from a gradually improving market and announced earlier this month that first quarter growth was up 11.4 percent year-on-year excluding CX Group tonnage handled in 2013.
     “We had a good start of the year with some new airline customers and increased volume of our existing customers,” said Whitehead. “In February, we successfully handled the second largest horse shipment with 65 horses flying in to Hong Kong for an equestrian event. The March tonnage was as high as the pre-Christmas peak in November 2013. The overall result of the first quarter was satisfactory."
SkyKing

     Planespotters track Sichuan Airlines aircraft as it approaches Taipei Songshan Airport.
China has agreed to study Taiwan's request that Beijing allow Chinese passengers to make connecting flights from Taiwan airports to foreign countries.
     Currently, many Chinese going abroad make connecting flights in Hong Kong, Singapore, Japan and South Korea.
     Taiwan's Straits Exchange Foundation (SEF) and China's Association for Relations Across the Taiwan Straits (ARATS) two semi-official agencies have signed 19 pacts to boost trade and exchanges across the Taiwan since 1993.

Oliver Evans
Honoring Jacques Ancher

     In Bali, Discovery Events is organizing what promises to be a most memorable and unique commemoration of the 107 lives lost 40 years ago in the crash of a Pan American B707-321 April 22, 1974 in Tinga Tinga, North Bali.
    Right now we are all thinking about MH 370 as a bizarre loss of a B777 without a trace. It reminds us that in 2014 our planet is not a small world after all, although as part of the global village we share the collective grief and sense of loss and send out our heartfelt condolences to everyone who has suffered post MH370.
     “Bali Remembers” actually has been a regular event over the years conducted at the Pan Am Memorial located behind the Taman Festival Complex in Padang Galak, Sanur.
     "Bali Remembers" includes traditional Hindu offerings, music, verse and also brief prayers offered by representatives of the six major religions practiced in Indonesia.
     Among the highlights of the afternoon will be an opening song “To Where You Are” sung in Bali by the legendary Indonesia singer-actor Prihartono Anton Mirzaputra, lead vocalist of Jamaica Café, the spectacular a ccapella group, that is sure to lift spirits all around.

     Several surviving family members, of those lost on PA-812, will be in attendance at the Bali event that will also include a solemn roll call.
Sky/Geoffrey

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