Dramatic and contrary effects

posted on 27th May 2020
Dramatic and contrary effects

Hard hit by both China’s early lockdown and the international lockdowns that followed, Cathay Pacific was one of the first airlines to operate suspended passenger services purely for air freight. But with 97% of its passenger flights cancelled in May and 95% set to be cancelled in June, even the carrier’s 20-strong freighter fleet ‘flying around the clock’ and growing numbers of ‘passenger freighters’ still leave it operating barely 50% of its normal cargo capacity

Covid-19 has had two dramatic and contrary effects on the air cargo business for Cathay Pacific. Due to travel restrictions worldwide and a drop in consumer demand, (as of early May) we are only operating around 3-5% of our scheduled passenger services; this has inevitably had a significant impact on network cargo capacity, as ordinarily around 50% of our total freight is carried in passenger aircraft bellies.

Conversely, demand for air freight services is strong, not least to ship vital personal protective equipment (PPE) and medical supplies to support the global effort to combat the virus. Indeed, an overarching purpose that has been driving our team since late January has been to work with customers and governments to ship such life-saving supplies to where they are needed.

Our 20-strong freighter fleet has been flying around the clock, with additional services operated where possible, and we have been operating hundreds of passenger flights as cargo-only in support of this endeavour. Our thoughts are with all those affected by the pandemic. There have been some unavoidable freighter schedule adjustments due to government-imposed flight restrictions in some countries – such as India and Vietnam.

Responsibility to customers
Despite this unprecedented situation, our first responsibility is to our customers and we are making every attempt to honour our commitments in terms of block space agreements and to support global supply chains at this critical time by adding capacity where possible to ensure that vital trade arteries remain open. This includes operating cargo-only flights using the belly-holds of passenger aircraft and chartering additional services through our wholly owned subsidiary Air Hong Kong, using aircraft from its fleet for daytime regional flights after its scheduled overnight courier operations.

Additionally, having obtained the required regulatory approvals, we are now able to add additional capacity to the cargo-only passenger flights by using the seats and overhead bins in the Economy Class passenger cabin of our Boeing 777 passenger aircraft. This can add approximately six to seven tonnes to these cargo-only passenger services. We operated the first of these flights on 23 April from Hong Kong to Los Angeles, and we hope to have the permissions to use the other aircraft in our passenger fleet shortly.

We were able to operate over 250 pairs of cargo-only passenger flights in March, and over 500 pairs in April. These included both regional services and long-haul services, for example to the Southwest Pacific region where air cargo capacity is extremely limited, as well as to Europe and the US.

Higher overheads to support the market
Whilst we have been aggressively pursuing opportunities to operate certain suspended passenger services purely for air freight, the overheads from these typically involve higher unit costs than regular all-cargo flights. Freight rates are subject to change in accordance with market demand as well as directional imbalances, but by actively exploring opportunities to increase capacity to meet customer requirements, we are doing all we can to support the market.

This has been a challenge, not just in terms of the differing restrictions at destinations across the network, but also in terms of having to operate workarounds whilst many of our teams are working remotely so as to mitigate against the risk of infection.

Manual loading challenge
Thanks to our teams’ diligence worldwide there has not been a noticeable delay in handling times, although solutions such as using the passenger cabin of aircraft do require longer timeframes and more manpower to manually load and secure shipments, compared to the relative efficiency of the mechanised loading of prebuilt containers in the hold.

During this time, safety remains of paramount importance. All staff and visitors to Cathay City and the Cathay Pacific Cargo Terminal are subject to temperature checks, including those who arrive by vehicle. Hand sanitiser is readily available at the main entrance and in public areas, while surfaces in washrooms, lifts and other high-use areas are cleaned frequently throughout the day with a bleach solution. Work from home arrangements are in place to help protect employees based at our headquarters, and there are additional cleaning regimens in place for aircraft and quarantine processes for our flight crew.

As the economic impact of Covid-19 intensifies, a recovery timeline in our customer demand remains difficult to predict. In May and June, we will be operating a bare skeleton passenger flight schedule to limit expenditure and preserve cash for the coming months, but we will remain flexible and continue to adapt to deliver the best possible outcomes to our customers.