Strong air freight demand to remain as US port backlog cleared

Strong air freight demand to remain as US port backlog cleared

Asia-Pacific airlines reported a 7 percent growth in international cargo in January.

HONG KONG — Trans-Pacific air freight markets will continue to benefit from shipper demand as U.S. ports take several months to clear the backlog of containers that stacked up during the protracted waterfront labor dispute between terminals and the union.

Brandon Fried, Airforwarders' Association executive director, said although the increased activity in the air cargo business was unlikely to be sustained now the dispute had been resolved, “clearing the existing backlog may take time and therefore prolong higher air freight volumes during that period.”

West Coast ports and employers predict it could be two to three months before the U.S.'s busiest gateway of Los Angeles-Long Beach is completely back to normal, although ports to the north could be cleared faster. 

Fried said the West Coast port issue was having a profound impact on members with several seeing significant spikes in air cargo demand on goods from Asia to California and the Western U.S.  “One told me about being awarded two charters from Asia at almost double the normal rate for such shipments.”

Air freight is roughly 10 times the cost of sending cargo via ocean, and the rising demand is pushing up prices even further. BB&T Capital Markets said according to Atlas Air, trans-Pacific air cargo rates have risen to $3.40/kg to $3.50/kg out of Hong Kong and over $4.00/g out of Shanghai.

This is adding to the pain of being forced into making emergency shipments by air. A global ocean shipper of household goods told JOC.com that the congestion had driven up their transport costs. “We have spent significant amounts of money, many millions of dollars, on premium freight, including both air cargo and air courier freight. Our suppliers have done the same, sometimes footing the bill and other times passing it to us,” he said.

“This is going to go on for at least four to six months before the USWC returns to some semblance of normalcy.”

A luxury garment maker said air freight was always a last resort, but even then it came with its own difficulties that were not only price related. "It has become more difficult to secure space as the congestion-driven demand has left the air market itself congested and transits are taking longer than normal non-peak seasons," he told JOC.com.

As West Coast ports ease their way back into full production, air cargo figures continue to come in for Asia carriers that show a steady increase in demand, partly as a result of shippers diverting from ocean to air.

The Association of Asia Pacific Airlines (AAPA) reported a solid 7 percent increase in international air cargo demand in January as import-export activity accelerated in the build up to the Chinese New Year holidays.

AAPA said the average international freight load factor continued to strengthen, recording a 1.3 percentage point increase to 61.8 percent on a 4.8 percent increase in offered freight capacity.

Andrew Herdman, AAPA director general said the January figures had given Asian carriers the positive take off to the year they were looking for.

"Air freight markets continued to see good growth, reflecting sustained consumer demand from North America and Europe for Asia-manufactured goods,” he said in a statement.

The air cargo industry is riding a wave of demand that is outpacing capacity supply in many markets and leading to an increase in the all important yields that govern profitability. Important Asia hubs such as Shanghai are reporting strong growth numbers, with the Sino-German terminal Shanghai Pudong International Airport Cargo Terminal Co. Ltd. (Pactl) seeing a 7.7 percent increase in outbound cargo in January compared to the same month last year.

In the expanding air freight business, the outlook for the year is all positive. The International Air Transport Association (IATA) has forecast a 5 percent growth in cargo volume for 2015, while Boeing has its prediction at 5.5 percent growth.

Herdman shared the optimistic sentiments. "The demand outlook appears positive for the coming year on expectations of further growth in the global economy, while lower oil prices should help to keep air travel affordable,” he said.

But no statement from the AAPA director general would be complete without a cautionary footnote. “Nevertheless, Asian carriers continue to face challenges marked by a competitive operating environment and the need to carefully monitor capacity in line with evolving market conditions,” he said.

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