Cathay Pacific Airways is expected to report half year results on Wednesday that show pressure on yields from a sluggish global cargo market combined with competition from Chinese airlines who are aggressively expanding.
Latest traffic figures for the airline and its subsidiary Dragonair show the continuation of a worrying trend of cargo weakness and a lack of premium passenger demand.
“After a flat second quarter, demand for air freight shipments remained below expectations throughout July,” said Cathay’s general manager of cargo sales & marketing Mark Sutch. He said “yield remained under pressure due to overcapacity in a number of markets” and that tonnage growth in the month lagged capacity growth “by a sizeable margin”.
Savings from the low fuel price environment have helped airlines record large year-on-year profit improvements, with China Eastern, the first Chinese airline to report half year results last Friday, posting a 249 times profit jump to 3.5 billion yuan from 14 million yuan a year ago.
Analysts say Cathay, which derives nearly a quarter of its revenue from its cargo business, will show more of the drag exerted by China’s waning export sector this year. But last week’s surprise devaluation of the Chinese currency – expected to help Chinese exporters – “may bring positive impact” on the global air cargo market that has been in a prolonged stagnation, said an analyst.
Despite the drag, analysts polled by Bloomberg estimate the company’s net profit for the first six months of the year is going to be HK$2.119 billion, compared with HK$347 million last year.