Air cargo shippers unaffected by carrier drive for profit, AAPA head says

Air cargo shippers unaffected by carrier drive for profit, AAPA head says

TOKYO — Asia’s competitive airline environment is placing intense profitability pressure on carriers in the region, but the focus on costs will not see air cargo shippers facing the wide scale route cutbacks, reduced frequencies and rolled shipments that have afflicted their ocean freight counterparts.

Asked by JOC.com whether services would be affected as airlines struggled to be profitable, as has happened in the shipping industry, Association of Asia-Pacific Airlines director-general Andrew Herdman said the opposite was occurring.

He said container lines were slow steaming, and cutting frequencies and routes, but even with huge growth in belly cargo and surplus freighter capacity, airlines were in fact pioneering new routes and finding new markets.

“The shift of manufacturing to inland cities in China has led to new services to Chengdu, for example,” he said. “There are developing markets where you have a small amount of narrow body aircraft with no cargo capability and you see small freighters — and in some cases large freighters — being put into those markets to pick up exports.”

Carriers such as Cathay Pacific, the world’s largest cargo airline, has steadily been expanding its freighter network and this month launches a Southeast Asian service that will operate twice a week on a Hong Kong-Singapore-Penang-Phnom Penh-Hong Kong routing.

“We have seen the freighter networks looking new places to serve. Part of that is airlines competing for business from other carriers, but part of it is also new business that the carriers have located.”

Rather than cutting back in the face of low yields and profitability challenges, the airlines are in fact expanding, and Herdman said shippers were the beneficiaries. “The market is well served, the rates are competitive and there is plenty of capacity to handle any peaks. The customers are happy, but the owners of airlines want to know when they will start to get the rewards for all the hard work they have put in.”

Herdman said the current high demand for air cargo would continue until after Chinese New Year in February and into the second quarter.

“The maritime side is seeing a similar pick up in trade and that indicates the market is on the mend. It is just that we have a lot of ground to make up in terms of the mismatch of demand and overall supply. Rates will remain competitive, partly because of fuel coming down and partly because of seasonality.”

Intra-Asia cargo flows were on their way to the end markets in Asia and was causing a shift in the structure of the supply chain networks. 

“There is massive investment in infrastructure, especially in China that has transformed road networks, warehouse and logistics facility sophistication because the consumers are growing in such vast numbers. This is helping to re-balance the loads, which are also spreading across Asia as factories diversify production to other countries in the region,” Herdman said.

Contact Greg Knowler at gknowler@joc.com and follow him on Twitter: @greg_knowler.