Cathay Pacific May Review Air China Cargo Fleet After Losses

Cathay Pacific Airways Ltd. (293) may review the fleet at a cargo venture with Air China Ltd. after losses at the operations contributed to the Hong Kong carrier’s first unprofitable half since 2008.

Air China Cargo will have to assess which will be the right aircraft to make it profitable in the long term, Cathay Pacific Chief Executive Officer John Slosar said today. The venture is taking four Boeing Co. (BA) 747-400 freighters from Cathay, which the Hong Kong-based airline is replacing with newer models.

“Old, fuel-inefficient airplanes is a tough business model,” Slosar said in an interview in the city today. “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 (753) 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.

The carrier agreed to buy a 49 percent stake in Air China’s cargo unit in 2010. It’s using the 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 rose 3.9 percent to HK$12.84 at the 4 p.m. close of trading in Hong Kong. Air China gained 0.6 percent. The two carriers, which own stakes in each other, both fell 4.3 percent yesterday.

Cathay has deployed 10 staff to Air China Cargo to help develop networks, Slosar said. The carrier will stick with the venture and does expect it to eventually make a profit, he said.

“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, Slosar said. The fourth quarter is traditionally the busiest for air freight because of the holidays.

To contact the reporters on this story: Jasmine Wang in Hong Kong at Jwang513@bloomberg.net; Susan Li in Hong Kong at sli31@bloomberg.net

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net

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