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China to Drive Long-Term Cargo Growth: Cathay CEO

Despite seeing its annual cargo throughput fall by more than 8.5 percent in 2011, the CEO of the world's largest air cargo carrier, Cathay Pacific Airways, tells CNBC he still sees long-term growth in the cargo business with China leading the charge.

Cathay Pacific airplanes stand on the tarmac of Chek Lap Kok airport in Hong Kong, China.
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Cathay Pacific airplanes stand on the tarmac of Chek Lap Kok airport in Hong Kong, China.

"I think you have a long term uptrend in cargo, in cargo movements especially from China," Cathay Pacific CEO John Slosar said on the sidelines of the Singapore Airshow. "China is still the manufacturing center of the world."

Cathay saw its December freight volumedrop by 12 percent from the same month in 2010, ending the year on a disappointing note. Even though the carrier didn't experience the expected fourth quarter boom, Slosar is optimistic of a turnaround in 2012 amid continuing economic uncertainty.

"Somehow we'll find maybe by the second half of this year, things are looking better and it will turn around again," Slosar said. "We're still long-term believers in the business. We still believe the long-term trend is up, we understand there will be year-to-year volatility."

Impact of High Fuel Cost

High oil prices will be one of the major drags on the airline's profitability in 2012, according to Slosar, who says the average oil price for 2011 was higher than 2008, when Brent Crude hit $140 a barrel.

"The concern for this year would be weakening revenue, but still very high oil prices," he said. "I mean the oil market is the one that I understand the least, because when you see the slowdown in economic activity that we're starting to see, you'd expect oil prices to be declining, but frankly they've been very sticky."

Slosar says it is difficult to hedge jet fuel beyond two years because of high oil prices. The airline hedges about 30 percent of its fuel consumption.

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