The travails spreading through the Asia-Europe trade are as painful in the air as they are on the sea. Despite a rush of positive air cargo data in recent weeks, the slump is nowhere near bottoming out.
September was particularly strong for the market. Hong Kong’s Cathay Pacific boosted traffic by 2.4 percent for the month from a year earlier to 134,584 tons, on a jump in shipments of high-tech consumer items from mainland China and other Asian manufacturing hubs. The Hong Kong-based carrier plans to increase scheduled freighter services to Europe in October ahead of the industry’s peak shipping season.
Hong Kong Air Cargo Terminals reported a 6.3 percent jump in September, to 237,761 tons, the best year-over-year growth since January 2011. “Exports from China are proving more resilient than many predicted, imports are looking better again, and transshipments continue to play an increasingly important part in our overall throughput,” Executive Director Lilian Chan said.
Pricing also has rebounded from the three-year low set July, with rates from China to Western markets rising approximately 7 percent between August and September and trending upward as airlines scramble to ship millions of Apple’s hugely successful iPhone 5. Rates likely will edge up in the coming weeks with some 50 million of Apple’s new smartphones expected to be shipped in the fourth quarter, along with the latest generation of Microsoft’s Windows operating system.
But the impact on the air cargo market likely will be limited. Apple and Microsoft product launches are “not going to provide the type of sustained growth in international trade the world has seen historically,” FedEx Chairman, President and CEO Fred Smith told investors recently.
Industry interests aren’t getting carried away by the recent spike in rates. “Signs of a minor recovery that were evident early in 2012 are fading quickly,” the International Air Transport Association said. “With consumer confidence declining in major economies and world trade growth slowing, the stability seen in freight markets through 2012 could be under threat.”
Like ocean carriers on the Asia-Europe route, air cargo interests are continually culling capacity to keep pace with shrinking demand. Lufthansa slashed Asia-Pacific capacity by 8.6 percent in September from a year earlier compared with just 2.1 percent on its North America network. Air France-KLM pulled out 14.7 percent of capacity in the Asia-Europe trade, but added 2.3 percent increase in its Americas network.
Airlines must cut capacity even more, particularly on Asia-Europe routes, where supply is running ahead of demand and putting further downward pressure on freight rates.
Traffic out of Asia to Europe, and North America, is key to the industry’s bottom line because the region is the world’s biggest market. The Asia-Pacific region has a 38.8 percent global market share, well ahead of North America at 24.4 percent and Europe at 21.5 percent, according to IATA figures.
Even more worrying for air cargo carriers is the move by cash-strapped shippers to send traditional air freight products such as computers by lower-priced and slower ocean shipping.
With Asia-Europe demand showing no signs of picking up, the industry is divided over prospects in the short term. “Declines in business confidence … signal potential for further weakness in demand over the next few months,” according to IATA.
Hong Kong Air Cargo Terminals’ Chan is more upbeat. “The slow but steady recovery in our figures ... gives us reason to believe that 2013 trends should continue positively, and that we are back to sustained — if modest — overall industry growth again.”
Contact Bruce Barnard at email@example.com.