Hong Kong-based Cathay Pacific Airways (OTCMKTS: CPCAY), alongside its subsidiary Cathay Dragon, reported sinking air cargo numbers for August amid ongoing political unrest in its home city. The airlines saw double-digit drops in both tonnes of cargo carried and cargo and mail revenue freight tonne kilometres.
Cathay Pacific hinted at tough times ahead during its most recent earnings call in early August. The call was before Hong Kong protests descended on the airport itself. Since then, the airline has lost two executives and been required to sideline some staff members.
In late August, the airline also warned investors to expect a “much more significant impact” on revenue than previously expected in light of the Hong Kong protests.
Both airlines combined carried 161,394 tonnes of cargo and mail last month, according to an announcement from Cathay Pacific. This is a full 14% decrease compared to August 2018. Cargo and mail load factor plummeted to 60.9%, down 7.5 percentage points year-over-year.
Capacity, measured in available freight tonne kilometres (AFTKs), was down by 0.6% year-over-year. Cargo and mail revenue freight tonne kilometres (RFTKs) dropped by 11.6% in the same time period. RFTKs are measured by multiplying load tonnes from the carriage of cargo by the sector distance.
In the first eight months of 2019 combined, the tonnage fell by 7.1% against a 0.8% increase in capacity and a 7.2% decrease in RFTKs, according to the Cathay Pacific announcement.
“On the cargo side, our business continued to face headwinds. Tonnage further deteriorated month-on-month across all regions, driven in particular by slow demand over the holiday season in different parts of the world and the effects of tropical storms and disruptions at Hong Kong International Airport,” Cathay Pacific Group Chief Customer and Commercial Officer Ronald Lam said. “Ongoing geopolitical tensions continued to affect overall market sentiment.”
Despite several factors putting downward pressure on Cathay Pacific’s cargo segment, Lam said the airline anticipates improvement on the cargo front this month due to seasonality.
“Our outlook for September is slightly more positive, and we expect to see demand progressively improve, driven by project shipments and the restocking of inventory as we enter the traditionally high-demand season,” Lam said,
Cathay Pacific also took a hit on the passenger side, seeing an 11.3% drop from August 2018. Load factor decreased as capacity rose in this sector as well.
“August was an incredibly challenging month, both for Cathay Pacific and for Hong Kong. Overall tourist arrivals into the city were nearly half of what they usually are in what is normally a strong summer holiday month, and this has significantly affected the performance of our airlines,” Lam said. “Our inbound Hong Kong traffic was down 38%, while outbound was down 12% year-on-year.”
Unlike cargo, Lam does not expect to see improvements on the passenger side in September. Still, he said the airline is “optimistic in the medium term.”
