Steep drop expected in Cathay Pacific's freight sector due to Trump's tariffs on Hong Kong goods.
🛬 The Troubles Mounting for Cathay Pacific's Cargo Business
The tonnages in Cathay Pacific Airways' cargo division are taking a hit, thanks to the decline in China-US e-commerce volumes, a surge in chartered flight cancellations, and plummeting freight spot rates. But a glimmer of hope comes in the form of plummeting jet fuel costs, which could help cushion the losses in the end.
The latest HSBC report painted a grim picture of the air freight market in 2025, with significant uncertainties looming due to geopolitical tensions, regulatory changes, and shifting trade patterns. According to Dimerco Express, a report that has generated a lot of buzz, e-commerce volumes from China have dropped a whopping 50% year-on-year since mid-April, as many companies were pausing direct shipments to the United States.
As a result of these Sino-US trade tensions, HSBC's report predicts several chartered cargo flights from mainland China have been cancelled since late April, with more cancellations anticipated in the coming weeks. The capacity pulled out is being funneled towards destinations like Mexico and other parts of Latin America where demand has surged.
In the grand scheme of things, the air freight market in 2025 is shaping up to be a wild ride. Cathay Pacific's cargo division is bound to face significant headwinds, but it's not all doom and gloom. The demand for high-value, time-sensitive shipments, like pharmaceuticals and perishables, remains relatively unaffected by broader sector challenges, with industry forecasts predicting a global air cargo demand growth of 5.8–6% in 2025.
Cathay has been pushing specialist solutions like Cathay Priority and Cathay Fresh, targeting high-growth and niche cargo markets. They've also been focusing on innovative logistics routes, like new cold-chain intermodal solutions via the Hong Kong–Zhuhai–Macao Bridge, to keep themselves ahead of the competition.
With the right strategic moves, determined resolve, and a little bit of luck, Cathay Pacific could navigate these turbulent waters and emerge victoriously. But this journey is far from over, and the challenges are piling up fast. Let's see if this Asian giant can weather the storm and come out on top!
| Trend/Challenge | Description | Impact on Cathay Pacific ||-------------------------|-----------------------------------------------------------------------------|-----------------------------------------|| Cargo Volume Growth | Double-digit YoY increase in Q1 2025, especially in niche segments | Positive, if nurtured and protected || Tariff Increases | US tariffs up to 245% on Chinese goods | Negative, unless mitigated through swift action || De Minimis Rule Change | No duty-free for shipments <$800 from China starting May 2, 2025 | Negative, unless alternative shipping methods can be identified || Freight Spot Rates | Volatility and downward pressure due to excess capacity | Negative, unless price stability can be secured || Flight Cancellations | Freighter flight cancellations, especially in affected routes | Negative, unless freighter deployment can be adjusted quickly || Resilient Segments | Time-sensitive, high-value cargo (pharma, perishables) | Positive, as long as these segments are maintained || Infrastructure Upgrades | Focus on specialist solutions, innovative logistics routes, and operational efficiencies | Positive, if deployed strategically and effectively |
- The declining business of Cathay Pacific Airways' cargo division is being influenced by various factors, such as the drop in China-US e-commerce volumes, an increase in chartered flight cancellations, and decreasing freight spot rates.
- The air freight industry in 2025 is expected to be characterized by uncertainties arising from geopolitical tensions, regulatory changes, and shifts in trade patterns, according to a recent HSBC report.
- E-commerce volumes from China have dramatically fallen by 50% year-on-year since mid-April, leading to several chartered cargo flight cancellations from mainland China, as reported by Dimerco Express.
- In the face of these Sino-US trade tensions, cancellations of chartered cargo flights have occurred since late April, funneling capacity to regions like Mexico and other parts of Latin America where demand has surged.
- Despite the challenging industry landscape, the demand for high-value, time-sensitive shipments like pharmaceuticals and perishables remains relatively stable, with forecasts predicting a global air cargo growth of 5.8–6% in 2025.
- To steer ahead in this competitive market, Cathay Pacific has launched initiatives like Cathay Priority and Cathay Fresh, working on niche cargo markets and innovative logistics routes such as the Hong Kong–Zhuhai–Macao Bridge's cold-chain intermodal solutions.
- To succeed in navigating these turbulent waters, Cathay Pacific needs to make strategic moves, maintain resilience, and react swiftly to challenges such as tariff increases, changes in de minimis rules, volatile freight spot rates, and freighter flight cancellations.
