Bloomberg News

Cathay Pacific Says Cargo Slowdown May Stretch Into Second Half

February 21, 2012

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Feb. 14 (Bloomberg) -- Cathay Pacific Airways Ltd., the largest international air-cargo carrier, said a freight slowdown may continue into the second half after it reported a 10th consecutive decline in monthly volumes.

The airline doesn’t see “much sign of a pickup” in the next few months, Chief Executive Officer John Slosar told reporters yesterday in Singapore, where he was attending a conference. “I would hope in the second half of this year things start to look better, but that will very much depend on the economy.”

The Hong Kong-based airline, which gets about 30 percent of sales from cargo, has pared freight capacity to North America and Europe as job concerns and waning consumer confidence deter shoppers from buying Asian-made goods. Carriers are also contending with a possible slowdown on long-haul travel demand and a 12 percent rise in fuel costs in the past year.

“I think there will be pressure, particularly for long- haul operations,” Singapore Airlines Ltd. CEO Goh Choon Phong said at the conference, which coincides with this week’s airshow. Travel demand in Asia has continued growing so far, which has shielded the airline, he said.

Cathay Pacific fell 1.3 percent to HK$15.52 in Hong Kong trading yesterday. The airline has dropped 22 percent in the past year, compared with an 8.5 percent decline for the benchmark Hang Seng Index. Singapore Airlines has fallen 23 percent in Singapore in 12 months.

Profit Decline

Globally, airlines’ profits will probably drop to $3.5 billion this year from an expected $6.9 million in 2011, according to the International Air Transport Association. That represents a profit margin of 0.6 percent.

The industry could slump to losses of more than $8 billion, if the European debt crisis sparks a recession, IATA said in December. European governments have stepped up efforts to tackle deficits, with Greek lawmakers passing an austerity plan paving the way for a financial bailout.

The European crisis has already hit airlines, causing Spanish carrier Spanair SA and Hungary’s Malev Zrt. to halt operations. Qatar Airways CEO Akbar Al Baker said it may spark a wider slump that will hit global airline traffic.

“There will be a strong recession,” he said. “We will be affected by at least 5 percentage points in loss of passenger numbers,” he said.

Apple IPad 3

Cargo demand may receive a boost later in the year with the introduction of new electronics devices, including Apple Inc.’s planned iPad 3. The products help airlines because manufacturers ship chips and other parts between Asian factories before sending the finished goods to consumers spread around the world.

“With new products coming to the market, hopefully that will spur some shipments,” said Singapore Air’s Goh. The carrier hopes to see a cargo “upswing” from the middle of the year, he said.

Cathay Pacific’s cargo traffic, or volume multiplied by distance, plunged 18 percent in January from a year ago as the earlier Lunar New Year added to the effect of a demand slump. China’s New Year holiday began on Jan. 23 this year, compared with Feb. 2 last year. Factories in the country generally close for at least a week around this time.

--Neil Denslow, David Risser

To contact the reporters on this story: Kyunghee Park in Singapore at kpark3@bloomberg.net; Jasmine Wang in Hong Kong at jwang513@bloomberg.net

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net


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