Twelve months ago, Hong Kong International Airport and its largest carrier tenant were standing tall at the top of their respective global air-cargo hierarchies.
Buoyed by soaring exports from China throughout 2010, HKIA had pushed past Memphis to become the world’s largest airport in terms of cargo throughput, while Cathay Pacific had taken over the crown of top international air cargo carrier from Korean Air.
The seemingly unstoppable wave of Chinese exports has since lost its momentum, resulting in sharp contractions in freight traffic. In November, usually the height of the peak season, Cathay suffered a 13.8-percent drop in traffic, which brought its tally for the January-November period to a year-over-year decline of 8.2 percent.
HKIA registered a 6.6-percent drop in throughput in November, owing largely to a 10-percent slump in exports. Its total for the first 11 months of 2011 showed a drop of 3.4 percent in tonnage.
This setback in cargo growth failed to stop HKIA’s expansion plans. Following a three-month public consultation on its Master Plan 2030, the airport authority recently confirmed its intention to move ahead with the construction of a third runway. The existing two runways are projected to reach capacity by 2020.
On the cargo side, HKIA predicts tonnage to reach 8.9 million tonnes a year by 2030, up from 4.17 million tonnes in 2010. The Hong Kong government is due to rule on the recommendation for the runway extension before the end of March.
Hong Kong Air Cargo Terminals, which handles about 80 percent of the airport’s cargo throughput, boosted its capabilities in December with the introduction of a new IT system billed at HK$240 million. The previous month, Cathay celebrated the official completion of the building that will house its own cargo terminal, a $700 million facility with a designated capacity of 2.6 million tonnes. November also saw the arrival of Cathay’s first of 10 B747-8 freighters. The carrier had underscored its expansion drive last August with an order for eight B777-200 cargo planes, which will start coming into the fleet in 2013.
In December, however, Cathay did step on the brakes. Having taken delivery of four 747-8Fs so far, management decided to defer delivery of two of the remaining six, which were all due this year, to 2013.
Other carriers have been forced to take more extreme measures in response to the darkening outlook. Another competitor for Cathay that stopped flying — at least for the time being — is Shenzhen-based Jade Cargo Airlines, although its woes have more to do with a clash over investment between shareholders.
Lufthansa, which shifted three China freighter flights to the North Atlantic in the wake of a curfew at its Frankfurt base, has signaled that it may ground some of its freighters if the economic slump persists. Nick Rhodes, Cathay’s director and general manager of cargo, won’t rule out a similar action, but stressed that it would be a measure of last resort.
“We will look at other options first,” he commented. “If necessary, we will reduce the utilization of the fleet rather than park aircraft. Parking aircraft is expensive and it takes time to bring them back when there is a resurgence in demand.”
Cathay has tried to meet the imbalance between capacity and demand through network expansion. It added a number of points to the freighter network, first and foremost in China, where it now has scheduled freighter runs to Chengdu and Chongqing. Zhengzhou is due to be added this month. Rhodes is also looking to India for expansion, most likely Hyderabad.
On the long-haul sector, Cathay has mounted twice-weekly freighter flights to Zaragoza and is considering Eastern Europe. Across the Pacific, the carrier stepped up the frequency to Miami, expanding its exposure to the Asia-Latin America trade route. Rhodes has his sights on Guadalajara, which will be served over a U.S. point.
In March, Cathay will hand over a fourth 747-400BCF to Air China Cargo. Two more planes may be shifted to Air Hong Kong, the joint venture with DHL, which has already taken three 747-400BCFs, as traffic on core intra-Asian routes is outstripping the carrier’s A300-600Fs, Rhodes said.
Cathay, which has so far used its 747-400ERFs mainly across the Pacific (they are going to be replaced in that sector with 747-8s) and a combination of 747-400Fs and 747-400BCFs to Europe, has deployed the latter type increasingly on intra-Asian sectors. The 777s are earmarked to replace the BCFs, of which Cathay still has seven in service today. Rhodes has looked at the A330-200F as a possible tool down the road for some intra-Asian markets, which are today covered with 747-400BCFs.
But in the current market conditions, his priorities are clearly elsewhere.