Inflation, supply-chain issues and Covid in China to hit airfreight demand, Cathay warns

Cathay Pacific Airways Ltd., one of the world’s biggest airfreight operators, warned that inflation, supply-chain snags and Covid restrictions in China could lead to weaker cargo demand in this year’s peak season.

“Inflation is having an impact on some areas of consumer demand, the supply chain disruption of recent months has dampened manufacturing output, and there continue to be constraints from Covid-19 on the Chinese Mainland,” Frosti Lau, Cathay’s general manager for cargo service delivery, wrote in an email newsletter Thursday.

Airfreight has been a rare bright spot for airlines during the pandemic as virus-related travel restrictions suffocated passenger services, particularly in Hong Kong, where Cathay is based. 

With Hong Kong’s curbs on travel gradually easing, including mandatory hotel quarantine dropping to three nights, Cathay has been resurrecting more of its passenger services. The airline is adding more cargo capacity in the bellies of aircraft, Lau said, while its freighters are operating a full schedule and some passenger aircraft are being used for cargo-only services regionally. 

“This extra capacity will help as we prepare for a busy peak, although we are anticipating it may not be as sustained and pronounced as last year’s,” Lau wrote. 

Peak season is the final quarter of the year, with busy holidays such as Christmas. Consumer product launches could still boost demand, Lau said.

Cargo accounted for about 75% of Cathay’s revenue in the first half of 2022 as passenger operations remained extremely subdued. Other leading cargo operators include Korean Air Lines Co Ltd., China Airlines Ltd. and Qatar Airways.