Weak passenger revenue and cargo business dim Cathay's growth prospects

Overall yield comes under pressure with the declining travel demand.

Although Cathay Pacific and Cathay Dragon reported a 4.7% increase in passengers carried in May, the revenue outlook remains dim and its cargo business continues to bear the brunt of worsening business sentiment.

“With declining travel demand in the market, especially to and from our long-haul destinations, overall yield has come under tremendous pressure,” Cathay Pacific director commercial and cargo, Ronald Lam said in a statement.

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The passenger load factor increased 0.9pp to 82.9%, and capacity, measured in available seat kilometres (ASKs), increased 6.6%. Overall, the number of passengers carried grew 4.1% in the first five months of 2019 as capacity rose 6.5%.

However, weak market sentiment continues to adversely affect Cathay’s cargo business as both volume and yield incurs declined YoY. In May, the volume of cargo and mail dropped 3.9% in May 2019 as compared to the same month in 2018.

The cargo and mail load factor fell by 4.7pp to 63.9% in May, whilst capacity, measured in available freight tonne kilometres AFTKs, was up 4.6% as cargo and mail RFTKs dropped 2.6%.

Despite a 1.0% increase in capacity and a 5.3% decrease in revenue freight tonne kilometres (RFTKs), tonnage fall 5.0% in the first five months of the year.

“Our cargo business continued to be adversely affected by geopolitical tensions and resulting dampened market sentiment. Despite positive capacity growth in May, cargo revenue saw negative growth over last year,” added Lam.