Asia-Pacific air freight spike spurs hopes of recovery

Air freight demand is picking up in the Asia-Pacific, but while the recovery is encouraging, airlines are concerned governments and the air cargo industry are impeding the recovery because of a collective failure to embrace e-freight technology.

by CHIEF CORRESPONDENT, TOM BALLANTYNE  

February 1st 2017

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After years of depressed demand, cargo volumes at Asia-Pacific airlines have returned to levels last achieved in the post-global financial crisis bounce-back of 2010, the International Air Transport Association reported last month. Read More »

Its latest air freight statistics, for November 2016, revealed air cargo business grew more than 6% for the month compared with 4% in the same period in 2015.

The data, said global freight tonne kilometers (FTKs), rose 6.8% in November compared to the year-earlier period. It was a slight slowdown from annual expansion of 8.4% in October 2016 - the fastest pace of air cargo growth in 18 months - and was more than 2.5 times the average annual monthly growth rate of 2.6% for the decade.

“Air cargo enjoyed a strong peak season in November and there are encouraging signs this growth will continue into 2017; particularly with the shipment of high value consumer electronics and their component parts,” said IATA director general and CEO, Alexandre de Juniac.

“But the trend in world trade remains stagnant. It is critically important for the air cargo industry to continue to improve its value offering by implementing modern customer-centric processes.”

Underpinning optimism about recovering regional air freight demand was research published in December by global consultancy, MarketLine, which emphasized the importance of the Asia-Pacific and the Gulf to a healthy air freight sector.

Global air freight would expand to 2021, primarily driven by the Asia-Pacific and the Middle East, it said. “With an under developed internal market, opportunity for growth also is possible, particularly in larger countries like China and India.”

MarketLine analyst, Paul Todd, said the world’s air cargo business is forecast to increase by 3.2% in the five years to 2021, to reach a value of $118.7 billion. The expansion would be supported by increased infrastructure in the Asia-Pacific and the advantages and cross-relations between freight modes. New technology in the industry will increase volumes at a steady rate, he said.

In January, the Association of Asia Pacific Airlines (AAPA) said Asia-Pacific international air cargo demand climbed 5.3% in November, underpinned by broad based expansion in export orders. Combined with a 3.2% increase in offered freight capacity, the average international freight load factor for Asia-Pacific airlines grew 1.4 percentage points to a 2016 monthly high of 66.9%, it said.

AAPA director general, Andrew Herdman, said: “the region’s carriers have seen a modest but progressive recovery in international air cargo demand this year, with growth of 1.2% for the first eleven months of 2016. Air cargo markets picked up modestly during the course of the year, but rates remain highly competitive,which reflected soft global trade conditions.

The upturn in air freight coincided with increased silicon materials shipments used in high value consumer electronics and an apparent turnaround in new export orders. A shift to air cargo after the August collapse of South Korea’s Hanjin Shipping Company may have contributed to the upturn, said IATA.

De Juniac said structural market shifts, particularly strong growth in cross-border e-commerce and pharmaceutical business, are contributing to the stronger performance. Preparation for the increasing popularity of sales such as Black Friday and Cyber Monday contributed to improved demand, he said.

“The drivers of stronger growth are sending a major signal for change to the air cargo industry. Whether it is e-commerce or the trade in pharmaceuticals, shippers are demanding more than paper processes can support. The shift to e-freight is more critical than ever,” he said.

IATA has released a study that identified a quantitative link between a country’s air cargo connectivity and its participation in global trade. Conducted by Developing Trade Consultants on behalf of the airline association, it found a 1% increase in air cargo connectivity was associated with a 6.3% increase in a country’s total trade.

“Air cargo is critical in supporting the global trading system. In 2015, airlines transported 52.2 million metric tons of goods, which represented about 35% of global trade by value. It is equivalent to US$5.6 trillion of goods annually or $15.3 billion worth of goods every day,” said IATA chief economist, Brian Pearce, at a December briefing in Geneva.

“Now we have quantitative evidence of the important link between air cargo connectivity and trade competitiveness. It’s in the economic interest of governments to promote and implement policies for the efficient facilitation of air cargo,” he said.

Pearce said countries can improve air cargo connectivity by ratifying and implementing the 1999 Montreal Convention that enables nations to adopt e-freight. They also should apply the World Trade Organization (WTO) Trade Facilitation Agreement and World Customs Organization’s (WCO) revised Kyoto Convention to introduce smart border solutions.

Governments have the important role of implementing global standards and agreements to facilitate trade and make it possible for airlines to modernize processes, said IATA.

Said Glyn Hughes, IATA’s global head of cargo: “In turn, the industry needs to embrace these opportunities to improve competitiveness and provide customers with enhanced shipping quality, service and better predictability.”