Bloomberg News

Cathay Pacific Sees Little Christmas Cheer for Air Cargo

November 12, 2012

Cathay Pacific Sees Little Christmas Cheer in Cargo Shipments

Cathay Pacific Airways Ltd. filled 63 percent of cargo space in September, down from 70 percent two years earlier, according to its latest traffic update. Photographer: Jerome Favre/Bloomberg

Cathay Pacific Airways Ltd. (293), the largest carrier of international air cargo, said it has seen only a small increase in freight ahead of the Christmas shopping season, prolonging an 18-month downturn in industry volumes.

The rise is “nothing like the really strong peak we might have seen,” Chief Executive Officer John Slosar said Nov. 9 in Kuala Lumpur, where he was attending an airline group meeting. Still, there is a “little bit of a pickup.”

A slow quarter will add to pressure on Asian carriers, which have already cut cargo flights, scrapped freighters and parked planes this year because of weak demand and competition from Middle East airlines. It also suggests that U.S. and European retailers are placing smaller orders because of concerns about the outlook for the Christmas shopping season.

The cargo slump “tells you just how pessimistic people are about the economic outlook overall,” said Andrew Herdman, the head of the Association of Asia-Pacific Airlines. “There’s no growth expectations.”

The group’s 15 member-airlines suffered a 3.2 percent drop in cargo volumes in the first nine months of the year, according to data on its website. The proportion of cargo capacity filled with freight dropped 0.5 percentage point in the period to 66.2 percent.

Singapore Airlines Ltd. (SIA) said Nov. 3 that it will park one of its 13 Boeing Co. 747 freighters for more than a year starting in January after losses at its cargo unit tripled in the quarter through September. Asiana Airlines Inc. (020560), South Korea’s second-biggest carrier, may consider returning its leased freighter if there’s no improvement in volumes, CEO Yoon Young Doo said at the Kuala Lumpur meeting.

‘Challenging Market’

Malaysian Airline System Bhd. (MAS) has cut some freighter flights, without yet parking any cargo planes, said its CEO Ahmad Jauhari Yahya.

“The market is challenging,” he said. “We just have to manage our capacity correctly.”

Cathay Pacific, which gets about a quarter of sales from cargo, has scrapped one freighter and parked two others this year. The Hong Kong-based carrier may consider further measures because of the slowdown, Slosar said. It filled 63 percent of cargo space in September, down from 70 percent two years earlier, according to its latest traffic update.

‘Reduce Capacity’

“It’s a problem,” Slosar said. “If the cargo isn’t there, the cargo isn’t there -- the only thing to do is reduce capacity.”

The airline rose 1.5 percent to HK$13.86 in Hong Kong trading today. It’s climbed 4.1 percent this year, trailing a 16 percent gain for the Hang Seng Index. The Bloomberg Asia Pacific Airlines Index, which tracks 17 airline stocks, has fallen 5.8 percent. Cathay Pacific separately said today that it plans to begin a weekly freighter service to Colombo, Sri Lanka on Dec. 2.

Globally, Europe has led a slowdown in cargo volume as recessions and cuts in government spending damp consumer confidence. Euro-area retail sales decreased a more-than- expected 0.2 percent in September from August. Consumers in the region plan to cut spending on year-end holidays by 0.8 percent to an average of 591 euros, according to a study by Deloitte LLP.

Global air-cargo traffic was little changed from a year earlier in September, according to the International Air Transport Association. Monthly demand has risen more than 1 percent only once since April 2011, excluding distortions caused by China’s lunar new year holiday.

To contact the reporter on this story: Kyunghee Park in Singapore at kpark3@bloomberg.net

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


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