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Picture

Cathay Cargo Pt2: 747-8Fs for the Future

17/8/2018

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Cathay Pacific Cargo was in a strong position in 2007 and in November placed its largest ever direct order with Boeing. This incuded 7 extra Boeing 777-300ERs but more importantly a commitment to 10 747-8Fs with 14 further purchase rights. At the time CX Cargo still had 6 747-400ERFs and a pair of 747-400BCFs on order. The idea at the time was to use the 747-8Fs for growth and to replace the 747-200Fs but the global financial crisis changed all that and instead the 200s were replaced largely by the 400ERFs.
For part 1 of this series see: Cathay Cargo: Global Jumbo Freighters
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Production of the 747-8 (for which unusually the freighter has been the lead variant over the 8i passenger version) was negatively impacted by several factors. Production of the first freighter began in August 2008, but only a few months later Boeing announced delays due to a lack of engineering resources, the redesigned wing and the impact of an 8 week machinist strike. Certainly the huge delays at the contemparaneous 787 programme had a major impact on the 747. Initialy deliveries were pushed back from late 2009 to the third quarter of 2010 but further delays were to come.
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B-LJA wears this Hong Kong Trader scheme. Photo by Maarten Visser from Wikipedia
The first 747-8F took off on February 8, 2010 but the flight testing highlighted a variety of design issues and along with continuing problems with the 787 delivery schedule the service entry was again delayed, this time until mid-2011. Eventually the first 747-8F entered service with Cargolux in October 2011. The delays to the 747-8F were probably not entirely bad for Cathay since it probably helped the Cargo component to weather the global financial crisis.
The GFC initially had a major impact on Cathay Group, which recorded significant losses in 2008, but the airline overall was back into profit the following year. As the 2009 annual report states in relation to cargo:

"Cargo revenue for the Cathay Pacific Group fell by 29.9% to HK$17,255 million in 2009, while the amount of freight carried for Cathay Pacific and Dragonair dropped by 7.1% to 1,527,948 tonnes. We reduced cargo capacity by 13.1% in response to the weakness in demand. This was reflected in a load factor of 70.8% (compared with 65.9% in 2008). Our cargo business was exceptionally weak in the first half of the year, with a significant decline in tonnage and yield in all key markets. The latter half of the year was stronger with yield increasing in October, albeit from a very low base, and rising consistently for the remainder of the year. Our cargo yield for the year fell by 26.8% to HK$1.86."
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B-LJF. Photo by Sergey Kustov from Wikipedia
The cargo capacity reduction included retirement of the 747-200Fs, gradual disposal of the 747-400BCFs and some temporary parking of 747-400Fs. Fortunately 2010 was a better year as the annual report of that year states:

"The Group's cargo revenue increased by 50.1% to HK$25,901 million. Freight carried by Cathay Pacific and Dragonair increased by 18.1% to 1.8 million tonnes. Cargo capacity increased by 15.2%, as we brought back into service freighters which had been parked in the desert during the downturn. Despite this substantial increase in capacity, the strength of demand was such that our load factor increased by 4.9 percentage points to 75.7%."
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The next year cargo softened again:

"The cargo business of the Group performed reasonably well in the first quarter of 2011. However, from April onwards, demand for shipments from its two most important markets, Hong Kong and Mainland China, weakened significantly and remained weak for the rest of the year. Cargo revenue for 2011 increased by 0.3% to HK$25,980 million compared with 2010. Yield was up by 3.9% to HK$2.42. Capacity increased by 6.9%. The load factor, however, fell by 8.5 percentage points to 67.2%. Capacity was managed in order to keep it in line with demand. In 2011 Cathay Pacific started cargo services to Bengaluru in India, Chongqing and Chengdu in Western China and Zaragoza in Spain."
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B-LJK at Heathrow. Photo by John Taggart from Wikipedia
Despite this softening in 2011 Cathay Cargo made commitments with Boeing for 8 777-200Fs, however these aircraft would never be delivered. Cathay's first 747-8F arrived in November 2011 (9 months later than originally planned). The new 747-8Fs were delivered in full Cathay Pacific paint and not the Silver Bullet scheme as Boeing was able to provide a lighter paint and the maintenance costs associated with the bare metal scheme, plus loss of marketing value, was not cost effective. Upon delivery  John Slosar, Cathay Pacific Airways’ chief executive officer said of the 747-8F:

“The B747-8F will help us further strengthen Hong Kong’s position as the world’s leading international air cargo hub. We look forward to the efficiency and environmental benefits that we expect to realise with this great new airplane.”

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Even so the new 747-8Fs were not perfect. Boeing had not fixed a vibration issue, which made a fuel tank inoperative, and thus impacted range, plus the GEnx-2B engines were not as fuel efficient as promised. Boeing has been gradually working on a performance improvement package (PIP) and the first PIP upgraded freighter was delivered to Cathay in December 2013.
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The Cargo market has continued to be challenging for Cathay but the airline has been adapting to new market conditions. In February 2013 the airline's own new cargo terminal opened and was fully operational by October. This gave the airline greater flexibility for consolidation of its cargo operations. Nevertheless market conditions for cargo have remained challenging over the past decade. in 2014 for example Cathay parked 5 of its freighter fleet temporarily.
These challenging conditions did for the 777-200F order, which in 2013 was swapped for a further trio of 747-8Fs. These were all delivered by the end of the year and the 747-8F was given an extra boost with another single aircraft ordered in December 2013 for delivery in 2016. This aircraft, B-LJN, arrived in early August.
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B-LJN in the new colours. From Wikipedia
The future for Cathay Cargo's dedicated freighter operations is trans-pacific operations with the rest of the world relying on space in the bellys of the passenger fleet. Cathay has suffered strong competition on Asia-Europe flights in particular from the Gulf carriers. Another challenge has been the fragmentation of the important manufacturing sector, which used to be focused on the Pearl River Delta region but has moving to Western China and Southeast Asia. This change has increased the need for Cathay to transport by air cargo to its Hong Kong hub and in 2015 meant the reactivation of a single 747-400BCF just for these duties.
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B-LJN at Tallinn. Photo by Anna Zvereva from Wikipedia
Cathay Pacific Cargo remains a major player in the world airfreight system at a time when others (like Northwest Cargo) have disappeared. It currently accounts for 24% of the Cathay groups annual revenue and operates to 47 destinations with its dedicated freighters. The Cathay Cargo fleet currently consists of 14 747-8Fs, 6 747-400ERFs and a single 747-400BCF. On May 3, 2017 the carrier announced addition a further pair of 747-8Fs (via wet lease from Atlas Air). As Cathay Pacific Director Cargo Simon Large said:

“This agreement underscores the strength of our cargo operations and our commitment to enhance the frequency of our services across our expanding global network."
It certainly seems Cathay is in the cargo business for the long haul and that with the now improved Boeing 747-8F it has the perfect aircraft to meet challenges to come. At least the air cargo market has picked up dramatically in 2018 suggesting that Cathay's 747-8Fs are a good investment.
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    I'm Richard Stretton: a fan of classic airliners and airlines who enjoys exploring their history through my collection of die-cast airliners. If you enjoy the site please donate whatever you can to help keep it running:


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