For shippers moving products in the crowded Asia-to-North America air cargo market, peak season means peak prices.
With the heaviest shipping season of the year kicking into high gear, carriers are charging importers up to 30 percent extra to haul their goods.Most of the peak-period increases range from 10 percent to 20 percent, but rates have risen as much as 30 percent on some carriers flying from Hong Kong and Taiwan, where heavy volumes are keeping eastbound air freighters filled.
Korean Air, Cathay Pacific Airways, China Airlines, EVA Airways, Singapore Airlines and Northwest Airlines all raised eastbound rates over the last few weeks as volumes moved toward their highest levels of the year, pricing executives at the airlines said.
The strength of the U.S. dollar in comparison with devalued Asian currencies is helping create a surge in eastbound air cargo, airline executives said.
That surge comes only a few months after some carriers chopped the number of passenger planes on trans-Pacific and intra-Asian routes because the region's financial crisis led to a sharp drop in travel. That eliminated some of the belly space normally used to carry cargo.
Korean Air, one of the trans-Pacific's largest cargo carriers, confirmed that rates are up as much as 30 percent on its flights from Hong Kong.
''But that increase has not been across the board'' from all cities in Asia, said Giulio Battaglini, Korean Air's Los Angeles-based cargo sales manager for the Americas. ''The amount varies by city of origin from 10 percent to 30 percent.''
Korean Air's eastbound cargo load factors from Asia to North America are running above 95 percent, with stations in Hong Kong, Manila and Penang, Malaysia, showing exceptionally strong volume, he said. Eastbound traffic from South Korea, Indonesia and Bangladesh is also strong.
''The higher rates are being driven by the fact that our planes are flying full inbound'' to the United States, Mr. Battaglini said.
At the same time, Korean Air's cargo load factor westbound is about 70 percent, Mr. Battaglini said. Korean Air has lowered rates to help attract westbound cargo, he said, but prefers not to discuss the specific reductions.
Johnny Yuan, cargo marketing manager at China Air's North American headquarters in Los Angeles, said peak-period rate increases are in effect on eastbound traffic. He said he had no details on the size of the increases. Eastbound prices are set in Taipei, he said. Cargo marketing executives at EVA Airways in Los Angeles echoed his comments.
China Air and EVA, both based in Taiwan, reported no general rate cuts for westbound traffic, but said they are making extensive use of spot pricing to help fill planes.
Northwest Airlines announced peak-period rate increases for eastbound traffic before a pilot's strike grounded the Minneapolis-based carrier late last month, said Eric Steinwinder, a spokesman.
Northwest has focused its price increases on exceptionally strong markets in Hong Kong and Taiwan, he said.
Some shippers expect eastbound rates to ease with the end of the strikes at Northwest and Air Canada.
Like several other airlines, Northwest has used spot price reductions to attract cargo moving west across the Pacific.
''No one wants to go out and cut contracts at lower rates when the market might bounce back,'' he said. ''I don't think anybody can realistically forecast what's going to happen in 1999. Just a year ago, nobody thought it would get this bad.''
Jennifer Carbone, district cargo manager at Singapore Airlines in New York, said the airline's exporting stations in Asia, including those shipping to North America, can increase their own eastbound rates based on market conditions prevailing in Asia. Singapore's rates westbound across the Pacific remain unchanged, but spot price reductions continue, she said.
Stephen Wong, North American cargo manager for Cathay Pacific, was traveling and not available to comment on reports of peak-period rate increases on eastbound routes.
PRACTICE HAS SPREAD
Fred Annunziata, vice president of Miami International Forwarders, said airlines started peak-period rate increases in late July, but said the practice spread in August, with more lines raising rates Aug. 15 and Sept. 1.
In some cases, airlines gave forwarders two weeks' notice that prices might rise, but often didn't provide specifics until 12 hours before the new rates took effect, he said. Miami International Forwarders has been particularly affected by the higher rates because it handles large volumes of Asian imports in transit for delivery to destinations in Latin America.
Barry Richard, director of pricing at Expeditors International in Seattle, said the eastbound rate increases are widespread enough that Expeditors has had to implement a peak season adjustment factor to cover the higher air freight charges.
Expeditors will end the extra charge when the airlines drop their rates back as the peak in shipments eases off, he said.
Lower yields from westbound cargo have given airlines an incentive to raise rates on eastbound cargo, Mr. Richard said.
Pat Kehoe, manager of global accounts at United Airlines Cargo, said the big U.S. carrier plans to put its seasonal adjustments into effect Oct. 1.
''The amount varies according to the individual trade lane, but they're generally in the 3 percent to 5 percent range,'' he said.
United's last across-the- board rate increase was in the fall of 1997, but some rates were adjusted last spring, Mr. Kehoe said.
Pricing executives at Federal Express in Memphis and at United Parcel Service in Atlanta said neither company plans to take any rate increases on heavy freight or priority packages during the peak shipping season.
John Vair, associate director at the Air Cargo Management Group in Seattle, said the economic crisis in Asia cut the number of air passengers flying to and from Asia, prompting several airlines to reduce the number of flights they had to Asian cities.