Cathay Pacific carried fewer than 25,000 passengers in January, a 99.2% decline from three years ago, and cargo capacity is down to 21% of pre-COVID levels, according to monthly traffic figures released Thursday that illustrate the devastating impact of Hong Kong’s restrictive reaction to the omicron variant.
With its large freighter fleet and extensive long-haul passenger network, Cathay has traditionally been one of the crown jewels in air cargo. It was the third-largest carrier by amount of cargo carried as recently as 2020. Now it is a shell of its former self.
Last month’s cargo volume of 81,837 tons was 51.5% less than in January 2019 and down 31.8% from the prior year. Revenue ton kilometers — a measure of cargo carried on each sector multiplied by distance traveled — decreased 64.4% year-over-year and 73.6% from 2019. Cargo capacity fell 69% from December.
As part of the government’s sweeping effort to eradicate COVID outbreaks, Hong Kong health authorities in early January increased the quarantine period from three to seven days for locally domiciled crews returning from international trips. The order reduced the number of available pilots, forcing Cathay Pacific to suspend a huge amount of long-haul cargo operations through March and causing substantial disruption for cargo customers.
The airline was only able to mount limited freighter flights to the Americas, while the shipment of goods to Europe, the Middle East and Southwest Pacific was provided by passenger aircraft carrying only cargo. The company has 20 Boeing 747 cargo jets in its fleet.
Cathay has been able to protect its regional freighter services, which allowed “added focus on opportunities in the Chinese mainland and the region. This resulted in increased cargo capacity for services to destinations in Northeast Asia and the Indian subcontinent where there was good demand prior to the Lunar New Year holidays,” Chief Commercial Officer Ronald Lam said in a statement.
Cathay’s cargo numbers are likely to sink further in February because of reduced shipment levels in the first half of the month associated with factory slowdowns because of the Chinese holiday period
Lam said freighter activity will be similar to that of January, although the airline has been able to restore some freighter frequencies to the Southwest Pacific. Overall, cargo flight capacity is likely to remain less than a third of pre-COVID levels during the first quarter — a slight improvement from January.
The rules handcuffing Cathay’s operations are heavily penalizing the airline at a time when cargo demand is booming and expected to remain strong throughout the year. In 2021, air cargo volume grew 7% and cargo margins soared for most airlines because of the supply shortage caused by reduced passenger flying. The situation is also frustrating for shippers who are scrambling for transport options in the face of ocean shipping bottlenecks, the ramp-up in Chinese manufacturing after the holiday period and persistent inventory shortfalls.
COVID has complicated Cathay Cargo’s operations on many levels, including the management of contactless aircrew transfers and disinfection regimens in aircraft and warehouses.
Cathay Pacific lost between $719 million and $783 million last year, a big improvement from 2020 when it was $2.8 billion in the red, according to preliminary results released last month. As at many airlines, strong cargo demand and high yields helped cushion the blow of pandemic-induced reductions in passenger business.
The airline carried more than 1.4 million tons of cargo last year, about the same as in 2020 but a third less than in 2019. Last year, it operated almost 8,000 cargo-only passenger flights, many with its six Boeing 777 jets reconfigured to accommodate cargo in the passenger cabin. Besides traditional commodities, it carried more than 120 million doses of COVID vaccines around the world.
Cathay Pacific officials have said they expect to burn between $128 million and $192 million per month while the quarantine-based capacity cuts remain in place.
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