The Cathay Pacific Group’s cargo revenue in 2013 declined by 3.6 percent compared to 2012. The company’s cargo business has been adversely affected by weak demand since April 2011. There was some recovery in business during the last three months of 2013, though business was still weaker than the same period in 2012. Yield for Cathay Pacific and Dragonair decreased by 4.1 percent. Capacity increased by 1.7 percent, but the load factor fell by 2.4 percentage points to 61.8 percent. Capacity was adjusted in line with demand throughout 2013 and more cargo was carried in the bellies of passenger aircraft in order to reduce costs. The airline’s new cargo terminal at Hong Kong International Airport became fully operational in October 2013, which Cathay says will allow the airline to reduce costs in the long-term. The Cathay Pacific Group saw an overall improvement in performance in 2013, which was largely due to the strengthening of its passenger business and the positive effect of measures introduced in 2012 to protect the business from the high price of jet fuel. The price of jet fuel remains a concern for Cathay Pacific. Fuel remains the group’s most significant cost, accounting for 39 percent of total operating costs in 2013. In April 2013 the airline took advantage of a brief drop in fuel prices to extend its fuel hedging into 2016. In 2013, Cathay Pacific continued to upgrade its fleet, taken delivery of 19 new aircraft: five Airbus A330-300 aircraft (including one for Dragonair), nine Boeing 777-300ER aircraft and five Boeing 747-8F freighters. In March 2013, the airline entered into agreements in relation to the cargo fleet as part of a package of transactions involving Boeing, Cathay Pacific, Air China Cargo and Air China that included the purchase of three Boeing 747-8F freighters (which were delivered in December 2013), canceled orders for eight Boeing 777-200F freighters, acquired options to purchase five Boeing 777-200F freighters and agreed to sell four Boeing 747-400BCF converted freighters. Also in December 2013, the airline announced an order for 21 new Boeing 777-9X aircraft (for delivery after 2020), three new Boeing 777-300ER aircraft and one new Boeing 747-8F freighter, and to sell six existing Boeing 747-400F freighters. The share of profits from non-airline subsidiaries and from associates decreased by 30.6 percent. This mainly reflects the start-up costs of Cathay Pacific’s new cargo terminal, which became fully operational in October 2013. The results also continued to be affected by the performance of Air China Cargo, the airline’s cargo joint venture with Air China.
The financial performance of the new cargo terminal in 2014 will benefit from the absence of start-up costs. Steps taken to improve the financial performance of Air China Cargo included the purchase of B777-200F freighters. A new ground-handling company, Shanghai International Airport Services Co., Limited, began operations in February 2013. This joint venture between Cathay Pacific, Air China, Shanghai Airport Authority and Shanghai International Airport Co. Ltd. provides ground-handling services at Shanghai’s two international airports, Hongqiao and Pudong. “The cargo business continues to be problematic. There is still no sign of any sustained improvement in the market, and some changes in the business appear now to be structural rather than cyclical. We thus have reduced the size of our freighter fleet and at the same time increased its efficiency,” Cathay Pacific chairman Christopher Pratt said. “We remain confident in Hong Kong’s future as an air cargo center and believe that our reshaped freighter fleet and our new cargo terminal will allow us to compete successfully in the long-term. The business outlook for 2014 looks to be improved when compared to 2013. We will continue to invest to make our business stronger while keeping our financial position strong.”