Cathay Pacific Airways has lost market share on European cargo routes as freight rates sink on weak demand from the euro zone. The carrier expects the overcapacity problem in the cargo market will only be corrected in the last quarter of the year. “Cathay has lost some market share during the downturn, especially to Europe,” said Cargo Director Nick Rhodes. “If the rates reach a level where we cannot cover our operating costs, we have no choice but to reduce our freight capacity.” Cathay has halved its freighter capacity on European routes to 11 freighters weekly from 21 last year. Overall capacity fell 1.8% in the first half of the year. Rhodes said Cathay was opting to carry high-yield or special cargo, which was still profitable. The disequilibrium would only be corrected in the last quarter when new high-technology products were launched, he said. But as high-tech manufacturing in China is moving inland, products are shipped directly to Europe and the U.S., bypassing Hong Kong, according to Sunny Ho, Executive Director of the Hong Kong Shippers’ Council. Zhengzhou Airport handled 150,000 tons of cargo last year, up nearly 50% on 2011 and is building a dedicated runway for freighter services. Air cargo in southern China, including Hong Kong, had entered a low growth period, said Sunny Yu, Chairman of ASR Holdings, a logistics company. In the first six months, Hong Kong airport posted a 2% growth in cargo tonnage to 2 million tons. Cargo handled by the Shanghai Pudong cargo terminal also saw slower growth of 1.5% in the first half to 604,019 tons as the airport faces the same problem as Hong Kong.

The Air China board has authorized guaranteed funding for the purchase of eight Boeing 777-200F freighters for Air China Cargo Co. The guarantee will be provided jointly with Cathay Pacific Airways, its partner in Air China Cargo, in accordance with their respective 51% and 49% stakes in the business.

Hong Kong’s air cargo market suffers as demand from Europe withered in the first quarter. Hong Kong Air Cargo Terminals (HACTL) saw a 2.6% dip in tonnage last month, ending a growth streak that started in June last year. The firm moved 246,912 tons of cargo, compared with 253,632 tons in March last year. For the first quarter, it still saw growth of 1.7%. Mark Whitehead, Chief Executive of HACTL, expected the tonnage in the second quarter would be at best flat compared with the same period last year. He said the lukewarm economy in Europe was to blame. “I don’t see much growth for the year,” he added. The International Air Transport Association (IATA), however, expected the global cargo market to have a strong rebound in the second half. Whitehead said the growth in demand from the Gulf area and intra-Asia trade would be offset by the softening in Europe, an important export market for Hong Kong. Sunny Yu, Chairman of ASR, a Hong Kong-listed independent logistic company, also cast doubt on the expected full recovery in the air cargo market this year. “The industry is bound to revise down the cargo growth forecast for 2013 as the recovery in the United States is slow, while demand from Europe further deteriorated in the first quarter,” Yu said. He added that the cargo market in the Yangtze River Delta was even worse than that in southern China and Hong Kong. Airlines and freighter operators started to cut back capacity because the temporary rise in the shipment of electronic goods last month failed to boost freight rates.

Courier and logistics firms – including UPS, DHL Shanghai and local YTO Express – were on a list of companies that were punished by the Civil Aviation Administration of China (CAAC). The companies were cited for transporting dangerous goods without reporting them between February and December of 2012. YTO was warned and fined CNY60,000 in December for mixing dangerous goods with normal cargo and failing to train workers properly to handle dangerous goods. The Shanghai Qihao Shipping Agency received the same punishment. The Shanghai branch of UPS was warned and fined CNY29,000 twice, in April and November of last year, for transporting dangerous cargo listed as normal goods, while DHL Shanghai was fined CNY29,000. Hainan Airlines and Yanan airport in Shaanxi province were warned for failing to transport dangerous cargo according to regulations. Thirteen other domestic logistics and delivery firms were also punished, according to the CAAC statement. “There has been an increasing number of violations involving dangerous cargo of the air-freight safety code in China because many parts and sections are involved in the transportation process,” the Administration said. In December, five courier firms, including four Shanghai firms, had their licenses for air-freight services suspended within three weeks for breaking the air-freight safety code. The Shanghai couriers – Yunda, YTO, Huixing and Qihang – had their licenses suspended for a year because they failed to report inflammable materials in their cargo, including in one case two lithium batteries that caused a small fire on a China Southern flight after it landed, the Shanghai Daily reports.

China completed two more ground tests for the Y-20, its biggest home-grown transport aircraft, following its successful maiden flight on January 26. Tang Changhong, Chief Designer of the Y-20, or Transport-20, said it took five years for Chinese designers to manufacture and test-fly the jumbo air freighter. Other large strategic air freighters in active service globally include the Antonov An-225, the Ilyushin Il-76 and the Boeing C-17 Globemaster III. The Y-20 will serve as China’s jumbo transport aircraft “over a very long period of time”. It will probably be put in service within five years. The 15-meter-high Yun-20 has a load-carrying capacity of 66 metric tons and a maximum take-off weight of 200 tons. Domestically designed and manufactured engines will be tested and once they have passed, they will replace the Russian engines which are currently used. The Chinese engines perform better in terms of fuel efficiency and thrust-weight ratio.