Cathay Pacific Cargo is hiking its block space agreement (BSA) prices on its transpacific and India services in response to current market conditions.
In a letter sent out to customers, the Hong Kong-based carrier said it would impose a General Rate Increase (GRI) of HK$18 per kg on the base rate of all the Block Space Agreements for transpacific routes with effect November 15 until the end of the contractual period.
An increase of HK$7 per kg would be applied on all services departing Hong Kong to India on the same date, the cargo business said.
The letter said the increase is to “reflect the latest air cargo market situation in Hong Kong”.
Air Cargo News has approached Cathay Pacific for a response.
Increases or re-negotiations of contract prices are not unusual, however, the approach varies from airline to airline with some preferring to form close relationships with customers.
Awery Aviation Software chief commercial officer Tristan Koch, who has worked for several airlines in the past, said: “I cannot comment on Cathay Pacific policy – but given their financial situation every dollar counts so their action does not surprise me. Historically they may not have revisited pricing mid BSA contracts as a cultural thing.
“But, I know a lot of other airlines that would renegotiate mid term if the markets moved considerably. Don't forget in many cases the forwarder wanted to negotiate downwards as markets softened. So it works both ways.”
Another customer said it was “unseen” for Cathay Pacific to no longer honour running contracts but added that current market conditions in Hong Kong were unprecedented.
Last year, the Cathay Pacific Group posted an operating loss of HK$18.1bn compared with a profit of HK$3.4bn in 2019.
And rates out of Hong Kong are certainly on an upward trajectory.
Figures from the Baltic Exchange Airfreight Index (BAI) show that last week prices from Hong Kong to North America reached $10.45 per kg, the second highest level this year and up from $9.12 per kg at the start of October.
Spot market prices are likely to be even higher given that the BAI includes BSAs.
From Hong Kong to Europe prices last week reached $7.24 per kg, the highest level recorded this year and up from $6.06 per kg at the start of the month.
Last month, Cathay Pacific reported its busiest month since the start of the pandemic.
Meanwhile, most market observers are expecting this year's peak season to be one extremely busy.
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