Cathay’s first-half profits hurt by fuel costs
Hong Kong-based Cathay Pacific airline said Wednesday its cargo business revenue climbed 8.7 percent in the first half of 2011, though the airline's total operating profit sunk 43.6 percent, to $358.7 million.
The airline didn't break out the operating profit of its cargo business, but said that cargo capacity increased 14.6 percent in the first half, while the airline's cargo load factor fell 9.6 percent.
'Demand for cargo shipments from our two main markets, Hong Kong and mainland China, was weaker than expected in the second quarter,' the airline said in a statement. 'The mainland China market was affected by a significant increase in competition, particularly on routes to Europe originating in Shanghai. There was good demand on our routes within Asia. We switched some capacity from long-haul routes in order to take advantage of this. Cargo imports to Hong Kong increased, particularly those in transit to mainland China, where demand for high quality foreign products is increasing. This could help to reduce the imbalance between the volumes of cargo exported from and imported to Hong Kong.'
Cathay said Japan's natural disasters in March hit the availability of high-tech items made in Japan, affecting manufacturing activities in mainland China and, consequently, cargo shipments from Hong Kong.
But the rising price of jet fuel was the key hurdle for the airline in the first half.
'The profitability of our cargo business was materially affected by increased fuel prices, particularly on ultra-long-haul routes,' Cathay said. 'Fuel surcharges were increased, but this only partly offset the increase in prices.'
The airline said it made minimal changes to its freighter network, adding a flight from Bangkok in May and separating a Hong Kong-Hanoi-Dhaka flight into two separate freight services. In May, Cathay launched its cargo joint venture with Air China, which flies under the Air China Cargo name and operates freighters between the Yangtze River Delta region and major global markets.
'There was no significant cargo peak during the first six months of 2011,' Cathay said. 'We managed capacity in line with demand on key routes.'
The airline also said delivery of its new-generation Boeing 747-8F freighters has been delayed again.
'The first two were due to arrive in August but are now scheduled to be delivered in September, with three more arriving before the end of the year,' Cathay said. 'The arrival of these new freighters will give us more capacity during the busy winter peak period. However, the latest delivery schedule is still subject to final confirmation.'