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Robust traffic lifts Cathay Pacific with iPhone cargo yet to be counted

Strong air cargo traffic out of Asia continued to lift Cathay Pacific volumes with August figures soaring almost 20 percent year-over-year and the Apple iPhone 6 launch expected to keep traffic high through September.

Cathay Pacific and sister airline Dragonair carried 146,955 tons of cargo and mail last month, an increase of 19.7 percent compared to August 2013. The cargo and mail load factor rose by 3.8 percentage points to 62.5 percent.

Capacity, measured in available cargo ton kilometers, rose by 13.3 percent while the revenue earned per flown ton of cargo and mail (RTKs) was up 20.6 percent. Crucially, cargo tonnage for the year almost matched the capacity added. For the year to the end of August, tonnage rose by 11.3 percent while capacity was up by 11.4 percent, and RTKs increased by 14.3 percent.

“Demand remained robust throughout August and the year-on-year tonnage increase was again well above expectations,” said Mark Sutch, Cathay Pacific general manager cargo sales and marketing.

“Demand out of Hong Kong and the key manufacturing regions in mainland China remained strong and we hope to see a further uptick in September as new consumer IT products are launched in the market.”

One of the key China markets served by Cathay Pacific is theHenan Province city of Zhengzhou, where two-thirds of the iPhones are produced and shipped out across the globe. The smartphones are assembled by Taiwan’s Foxconn at factories in Zhengzhou following the shift of production there from Shenzhen in 2010.

Cathay Pacific operates six freighters a week between Zhengzhou to Hong Kong where they connect into the carrier’s global network. But the carrier has a long list of competitors also serving the market: Cargolux, AirBridgeCargo, China Airlines Cargo, Air China Cargo, China Southern Cargo and UPS. A host of passenger airlines also call at Zhengzhou Xinzheng International Airport, code CGO, adding significant belly cargo capacity to the market.

A key focus area of Cathay Pacific is the Americas, and cargo director James Woodrow told the South China Morning Post in Zhengzhou that the U.S. economy was critical to the growth of the air cargo industry.

“The more the U.S. and global economy accelerates, the faster our load factors will grow,” he said.

Cathay Pacific will further extend its cargo business into the Americas with a new freighter service to Calgary and increased frequencies to Columbus in October, and more flights to Mexico from November.

But with all the excitement at robust volumes and rising traffic, one percentage that is in decline has Woodrow worried. In the air cargo industry, per unit profitability is measured in yield and during the first half of the year, the yield fell by 6.9 percent.

“We are not in the business just to carry kilos, we are in business to make money,” Woodrow told the Hong Kong newspaper. “So we also need to see yield increasing, and that in the last three years has been very tough.”

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