Cathay may reconsider Air China cargo fleet after H1 loss of US$39 million

HONG KONG's Cathay Pacific Airways may review the fleet at a cargo venture with Air China after huge operational loss contributed to the Hong Kong carrier's HK$300 million (US$38.7 million) half-year loss, marking the airline's first unprofitable half since 2008.

Cathay's freight unit, the world's largest carrier of international cargo, posted a 10 per cent drop in volumes as waning consumer confidence in Europe dented demand for Asian-made electronics.

Cathay Pacific CEO John Slosar said Air China Cargo will have to assess which will be the right aircraft to make it profitable in the long term. The venture is taking four Boeing 747-400 freighters from Cathay as the Hong Kong-based airline is replacing them with newer models.

"Old, fuel-inefficient airplanes is a tough business model," Mr Slosar said, adding that "we'll have to look at that to see what is the right way forward in terms of the fleet."

Cathay suffered a HK$300 million loss from its Air China Cargo stake in the first half as it slumped to a surprise HK$935 million net loss. The airline's own business was also hit by a slump in global freight shipments, rising fuel prices and slowing demand for premium travel, Bloomberg reported.

The carrier agreed to buy a 49 per cent stake in Air China's cargo unit in 2010. Currently, it uses four 747-400 freighters, which were converted from passenger planes, to help pay for the investment. The new joint company began flights in March 2011.

Cathay has seconded 10 staff to Air China Cargo to help develop the networks, Mr Slosar said, pointing out that the carrier will stick with the venture and expect it to eventually make a profit. "It will take some time," he said. "But I think it's something we will be able to achieve."

The airline is also seeing "early indications" of a possible pickup in cargo demand in the second half, Mr Slosar said. The fourth quarter is traditionally the busiest for air freight because of the holidays.