HONG KONG — Five straight quarters of continued growth and a supply-demand balance has led to a turnaround in the air freight business this year, with more solid growth still to come, believes Atlas Air’s Michael Steen.
The all-cargo carrier’s executive vice president and chief commercial officer said the second half of the year had seen an upswing in overall demand, and air freight would continue to grow across all regions in 2015.
“There will be peaks and falls, but 2015 will be a healthy year overall,” Steen said. “The underlying drivers are all there and it seems like the overall demand situation has turned around. In the third quarter we also saw demand actually outpacing supply, and that is the first time we have seen that in a long, long time.Taking those indicators together, there is a solid turnaround in the air freight business.”
This was supported by the latest data available from The International Air Transport Association (IATA), which showed that the strong performance of air cargo in recent months continued into October.
Demand, measured in freight tonne kilometers (FTK), rose 5.4 percent in October compared to the same month last year, out-stripping capacity that grew by 4.4 percent and taking freight volumes to a new record monthly high.
“We are now back to levels of demand not seen since the 2010 post-recession bounce-back,” Tony Tyler, IATA’s director general and CEO, said when the data was released last week.
Eric Erbacher, Asia director for air charter airline Chapman Freeborn, said cargo demand along the Pacific Rim remained strong and the supply and demand of capacity was balanced at the moment, while the recent surge in additional charter capacity had eased in the last week.
“It appears that shippers are in a ‘wait and see’ mode in regards to the West Coast port congestion situation, before betting and taking in additional chartered capacity,” he said.
“However, a few tailored charters for specific large industry clients and integrators are being contracted, especially out of key hubs like Zhengzhou, Shanghai, and Hong Kong.”
The U.S. West Coast port congestion has been a gift to the air charter industry in the last few months, coming as it did during a solid and extended peak season. Scheduled airlines found it difficult to accommodate the sudden demand as anxious shippers tried to avoid the bottlenecks choking Los Angeles-Long Beach and spreading to other ports along the West Coast.
Air cargo has begun to slow this week but by mid-January the volumes will start to pick up as shippers move their products in and out of China before the factories shut down for Chinese New Year. The Year of the Goat will be ushered in on Feb. 19, but factories can remain closed for up to three weeks.
Steen said fast rising e-commerce was one of the big demand drivers, especially for the integrators, as consumers moved to the online channels, as well as several new electronics products being launched during the peak season.
“We are seeing an increase of electronics out of Asia not only going into they U.S., but also going into Europe. Demand has been very solid leading up to the holidays,” Steen said.
“There will be a solid January compared to a typical January. The global economy will keep demand up until Chinese New Year, and we will see a fairly good demand up until March when inventories are rebuilt.”
Apple’s new iPhone 6 was one of the consumer electronics products that had its Asia launch in early September. The company claimed to have sold 39.3 million of the smart phones in the three months ending Sept. 27, up 16 percent from the same period a year earlier.
Evidence of the growing consumer electronics business can be seen in semiconductor sales that are 72 percent connected to air freight volume, investment firm BB&T said a recent report. The Semiconductor Industry Association (SIA) said worldwide sales of semiconductors reached $87 billion during the third quarter, an increase of 5.7 percent over the previous quarter and a jump of 8 percent compared to the third quarter of 2013.
Contact Greg Knowler at firstname.lastname@example.org and follow him on Twitter: @greg_knowler.