Cathay Pacific

Cathay Pacific loses out as cargo demand dwindles in Europe

PUBLISHED : Wednesday, 17 July, 2013, 12:00am
UPDATED : Wednesday, 17 July, 2013, 5:59am

Cathay Pacific Airways has lost market share on European cargo routes as freight rates sink on weak demand from the troubled euro zone.

The carrier expects the overcapacity problem in the cargo market will only be corrected in the last quarter of the year.

If we cannot cover our costs, we have ... to reduce our freight capacity
Nick Rhodes, Cathay Pacific Airways

"Cathay has lost some market share during the downturn, especially to Europe," said cargo director Nick Rhodes. "If the rates reach a level where we cannot cover our operating costs, we have no choice but to reduce our freight capacity."

Cathay has halved its freighter capacity on European routes to 11 freighters weekly from 21 last year. Overall capacity fell 1.8 per cent in the first half of the year.

Cathay said earlier its cargo tonnage dropped more than 4 per cent last month from a year earlier, against 1 per cent cargo growth at the airport.

Rhodes said Cathay was opting to carry high-yield or special cargo, which was still profitable.

The disequilibrium would only be corrected in the last quarter when new high-technology products were launched, he said.

Manufacturers, however, are still pessimistic about the outlook for the second half of the year. Apple and Samsung have moved their manufacturing lines from mainland coastal areas to inland cities such as Chongqing, Xian, Zhengzhou in Henan and Ordos in Inner Mongolia.

"Hong Kong carriers cannot benefit as much as before as these shipments from the inland cities opt to ship directly to the United States or Europe," said Sunny Ho Lap-kee, the executive director of the Hong Kong Shippers' Council.

Foxconn Technology, the manufacturer of Apple products, is reported to have hired 300,000 workers at its plant in Zhengzhou.

Zhengzhou Airport handled 150,000 tonnes of cargo last year, up nearly 50 per cent on 2011. In April, the State Council approved Zhengzhou's plan to build a second runway and a dedicated runway for freighter services.

Foxconn has relocated 800,000 workers at its plant in Dongguan to other plants across the mainland, leaving only 100,000 in the southern city.

Hong Kong carriers will now face greater competition from rivals for the hi-tech shipments which used to be transported to Hong Kong for shipping overseas.

As other manufacturing plants also have relocated to other cities or countries, air cargo in southern regions, including Hong Kong, had entered a low growth period, said Sunny Yu Ho-yuen, the chairman of ASR Holdings, a logistics company.

In the first six months, Hong Kong airport posted a 2 per cent growth in cargo tonnage to two million tonnes.

Cargo handled by the Shanghai Pudong cargo terminal also saw slower growth of 1.5 per cent in the first half to 604,019 tonnes as the airport faces the same problem as Hong Kong.