Combined cargo revenue for Cathay Pacific and Dragonair in the first half of the year fell to HK$11.37 billion (US$1.46 billion), a decrease of 2.5% compared to the same period in 2014, as demand that began strong in summer 2014 and continued during the first few months of 2015 slackened in the second quarter, according to Hong Kong-based Cathay Pacific group.
Strong competition, overcapacity in the industry, and a significant reduction in fuel surcharges were the reasons for the decline, which put downward pressure on cargo yield as well, causing it to drop by 11.1% to HK$1.93, said a company statement. Capacity for the sister airlines grew by 8.9% and the load factor increased by 0.9 percentage points to 64.1%.
Overall, however, the Cathay Pacific group reported an attributable profit of HK$1.972 billion for the first six months of 2015 on strong passenger demand. This compares to a profit of HK$347 million in the first half of 2014. Earnings per share were HK50.1 cents compared to HK8.8 cents for the corresponding period in 2014. Revenue for the period decreased by 0.9% to HK$50.388 billion owing to lower fuel surcharges and declining cargo demand.
By route, cargo shipments to and from North America were strong in the last quarter of 2014 through the first part of 2015, bolstered in part by maritime backlogs caused by the labor strike on the U.S. West Coast. But by the second quarter, demand started to decline in May as the backlogs were cleared.
Shipments originating from China to North America were strong, benefiting from the growth of e-commerce. Intra-Asia shipments continued to grow in the first six months of 2015 as production increased in Southeast Asia.
The airline’s Japan business benefited from strong demand for shipments to North America, and demand for shipments to and from the Indian subcontinent was strong.
Shipments to Europe were below expectations, but shipments from Europe and the South West Pacific increased.
During the first half, the company added two cargo flights per week to North America in April. “We operate 37 cargo flights per week to North America. We changed routings in order to increase cargo capacity on the Chicago, Los Angeles and New York routes,” it said.
The group’s cargo terminal 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. The terminal handles cargo for Cathay Pacific, Dragonair, Air Hong Kong, and five other airlines. It introduced a cross-border bonded trucking service in the first quarter of 2015.
“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 group predicted.
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. We reduced our operating costs due to lower fuel prices, partially offset by fuel hedging losses. We continued to manage non-fuel costs effectively. But we face challenges. Yield remained under pressure and there is increasing congestion at Hong Kong International Airport.”
Looking ahead, he said that they expect business to do well in the remainder of 2015 since the company usually performs better in the second half of the year.
Photo: Jefferry
