Hong Kong's Cathay Pacific Group, which includes Dragonair, returned to profit in the first half with earnings of HK$24 million (US$3.09 million) year on year, drawn on revenues of HK$48.5 billion, down 0.6 per cent, according to the Shipping Gazette.
Cathay reversed itself from a HK$929 million loss in the first half of 2012, which was followed by stringent cost cutting, withdrawal less fuel efficient aircraft and changing schedules as well as savings from 8.5 per cent lower fuel costs.
"Our cargo business has been affected by weak demand since April 2011. There is still no sign of sustained improvement," said Cathay Pacific group chairman Christopher Pratt.
The group's cargo revenue for the first half of 2013 was down by 5.2 per cent to HK$11,278 million compared to the same period in 2012, said the company in a filing to the Hong Kong stock exchange.
Cargo capacity for Cathay Pacific and Dragonair was down by 1.8 per cent. The load factor was down by 1.9 percentage points to 62.4 per cent. Yield was down by 3.3 per cent to HK$2.33.
"We reduced our schedules and made ad hoc flight cancellations. We carried more cargo in the bellies of passenger aircraft to reduce costs. On the plus side, our new cargo terminal at Hong Kong International Airport is expected to be fully operational by the last quarter of 2013, which will reduce costs," Mr Pratt said.
"Our passenger business in the first half of 2013 improved compared to the same period in 2012. Revenue increased by 0.8 per cent to HK$34,978 million, although capacity decreased by 4.8 per cent. The load factor increased by 1.2 percentage points to 81.3 per cent.
"In the first half of 2013 we did our best to align capacity with demand and to maintain load factor and yield. We reduced our schedules and made ad hoc flight cancellations. We carried more cargo in the bellies of passenger aircraft to reduce costs," said Mr Pratt.
Demand for cargo shipments from Cathay's main market, Hong Kong, remained weak. In the light of increasing competition on European routes, flights were merged to better manage capacity.
Passenger demand was strong on long-haul routes in all classes of travel, said the company statement accompanying the results. However, demand on regional routes did not match the increase in capacity on these routes, which put yield under pressure. "Travel within the Asia Pacific region was affected by H7N9 avian flu and political issues in Northeast Asia," the statement said.
Demand on transpacific routes was more robust but was still below expectations. Demand on routes within Asia was relatively robust, but yields were under pressure due to surplus capacity made available by other airlines.
Competition for shipments from Shanghai remained strong. "We merged our Chengdu and Chongqing routes in order to reduce costs and to make ourselves more competitive. We reduced the Zhengzhou schedule from six flights a week to three due to reduced demand from major hi-tech manufacturers," Mr Pratt said.
In North Asia, demand for shipments from Japan was weaker. The depreciation of the yen has not, as yet, helped to revive exports, Cathay said, adding that the performance of Taiwan and Korea routes was below expectations.
"In Southeast Asia, demand for shipments of hi-tech consumer products from Hanoi was strong. We split the Hanoi-Dhaka service to enable more tonnage to be carried from both places. We also put on additional Hanoi services," he said.
Weak demand for shipments from Hong Kong itself resulted in more space being available on transpacific flights from Hong Kong. Some of this space was used for shipments transiting Hong Kong from the Indian sub-continent.