CARGO GIANT

Cathay Pacific has the fleet, network and facilities in Hong Kong to grow its freight business in a challenging year for the cargo industry, writes Joe Bates.

One of the top five airlines in the world for freight tonne kilometres, Cathay Pacific is the cargo giant at its Hong Kong home base and a major player in the global market with 21 Boeing 747 freighters among its fleet of around 200 aircraft serving more than 100 destinations in 35 counties and territories.

Its all-cargo fleet of 14 Boeing 747-8Fs, six Boeing 747-400ERFs and one Boeing 747-400BCF alone serve 46 destinations across the world making it a force to be reckoned with in the highly competitive Asia-Pacific, Asia-Europe and Asia-North American markets.

While its state-of-the-art Cathay Pacific Cargo Terminal is one of the most modern and high-tech in the world. Opened in 2013 and operated by subsidiary Cathay Pacific Services Ltd (CSPL), its multi-storey facilities are capable of handling up to 2.6 million tonnes of cargo yearly.

According to the airline’s annual accounts, Cathay Pacific and 100% owned subsidiary, Cathay Dragon, enjoyed a good 2018 characterised by “robust demand” and rising revenues.

In facts and figures this equated to total revenues of HK$2.83 billion (+18.5%), 2.15 million tonnes of cargo and mail (+4.7%) carried across its network and a 14.7% rise in yields, reflecting an increase in high-value specialist cargo shipments and higher fuel surcharges.

Cathay Pacific’s general manager for cargo service delivery, Frosti Lau, says that these figures alone show just how important cargo is to Cathay Pacific and the airline group.

“Cargo is a huge, and often overlooked part of our business, that contributes between 20% and 30% of Cathay Pacific’s annual revenues,” he enthuses, noting that the airline enjoys roughly a 50/50 split between volumes handled in the bellyhold compartments of passenger flights and its fleet of freighters.

“There are, of course, payload restrictions on some routes, but people frequently forget that we carry a significant amount of cargo on passenger flights. A Boeing 777 flight between London and Hong Kong, for example, can carry over 30 tonnes of freight in its belly, earning significant revenues.

“In fact, sometimes the revenue generated by bellyhold freight is the reason a route is profitable and, in certain cases, the justification for its existence when passenger load factors dip.”

Like every major carrier, Cathay Pacific began to experience a slowdown in cargo volumes during the latter half of 2018 and this has continued into 2019, not helped, of course, by the ongoing trade tensions between the US and China.

Indeed, the year to date has been tough for the Cathay Pacific Group with cargo and mail volumes falling 4.9% to 483,211 tonnes in Q1 2018. However, Lau refuses to be downbeat, reminding me that the airline “doesn’t just focus on China” and that transhipments from the Indian subcontinent and Southeast Asia to the US remain strong, as do the markets to Europe and Oceania.

He believes that the continued growth in these sectors shows “the beauty of having a network”, and states that having a base like Hong Kong is a huge advantage as demonstrated by the number of cargo carriers and charter operators that would like to launch services to HKIA.

Lau notes that the bulk of the airline’s freighter services are to the US, with demand currently being met by between 30 and 40 Boeing 747F flights per month depending on the time of year.

Elsewhere, Cathay Pacific operates six to seven freighter services a week to Europe and 18 cargo flights per week to Mainland China, predominantly to cities which are the major manufacturing base for Apple and other companies producing components for mobile phones and telecommunications equipment.

Each of the airline’s Boeing 747 freighters is capable of carrying between 100 and 120 tonnes of cargo per flight depending on the route, loads and types of cargo being transported.

Regarding the current US-China tensions, the airline’s plan for now is to “continue to closely observe the China-US trade talk developments and their impact on global trade flows”.

One thing for certain is that the airline hasn’t let the downturn in the market deter it from developing its cargo business, as the recent agreement with Lufthansa Cargo for shipments between Hong Kong and Europe proves.

As a result of the agreement, customers of Cathay Pacific’s cargo division and Lufthansa Cargo are now enjoying the advantages of the recent expansion of the carriers’ joint business agreement (JBA), which has seen the start of eastbound joint shipments from Europe to Hong Kong.

Under the JBA framework, Hong Kong is directly connected to Frankfurt, Amsterdam, Barcelona, Brussels, Dublin, London (Gatwick and Heathrow airports), Madrid, Manchester, Milan, Munich, Paris, Rome and Zurich.

In addition to the capacity provided by the airlines’ dedicated fleet of cargo aircraft, the belly space of passenger aircraft and the road feeder services of both partners can also be booked by customers.

As well as collaborating on network planning, Cathay Pacific and Lufthansa Cargo have worked closely together on IT and service enhancements since the signing of the co-operation agreement in May 2016.

Cathay Pacific’s commercial and cargo director, Ronald Lam, says: “Our co-operation with Lufthansa has reached an exciting new phase, which is of great benefit to our customers in Europe and undoubtedly strengthens one of the world’s great trade lanes.”

And earlier this year the airline gained IATA CEIV Fresh certification – the mark of excellence for handling perishables.

Lau believes that the newly earned certification is more than justified, feeling that Cathay Pacific has led the way in the handling of perishables for a number of years. Its service excellence, he says, being demonstrated by the fact that all inbound perishable consignments in Hong Kong are routinely released within 90 minutes of arrival.

“Our facilities, route network and services make us one of the world’s best cargo airlines and we must continually look to improve to stay there,” comments Lau. “Our recent CEIV Pharma and Fresh certifications are examples of how we are upping our game in different areas to make sure this happens.”