Air Cargo
Vital signs good for air cargo
After several years of stagnating growth, the Asia-Pacific cargo business is set for a revival that Airbus forecasts will focus on the region’s mid-size freighter fleet.
November 1st 2013
Asia-Pacific airlines continue to battle to turn a profit at their cargo operations, but they may be winning the war. Read More »
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| Airbus vice president and head of freighters, Andreas Hermann: Asia-Pacific to benefit most from air cargo upturn |
Airbus vice president and head of freighters, Andreas Hermann, in Hong Kong in October to unveil the European aerospace manufacturer’s global freighter forecast to 2032, said: “After rain, there is always sun.” And when the upturn comes it will be the Asia-Pacific which will benefit most, he said.
“Looking forward, after a difficult few years, world trade is showing an improvement and diverse emerging markets will call for increased flexibility in air cargo transportation – for which mid-size freighters will be the primary means to achieve this,” he said.
“This is why Airbus forecasts that the core of future freighter requirements will be in the mid-size category, where modern technology freighters will play a large part in future fleet replacement and long-term growth.”
However, a full recovery in the frail sector is yet to be pronounced. The Association of Asia Pacific Airlines (AAPA) said last month that the region’s air freight markets remained soft, due to sluggish global trading conditions. International air cargo demand was 0.3% higher in the month compared with 12 months ago. Freight capacity increased by 2.8%, leading to a 1.6 percentage point fall in average international freight load factor, to 63.1%, for the month.
“For Asia-Pacific airlines, international passenger demand has maintained its strong growth trend. But air freight markets have been persistently soft, with a 1.7% fall in the sector’s demand in the first eight months of the year, because of lacklustre trade growth and relatively weak markets for electronic products and other high value goods that are normally shipped by air,” said Andrew Herdman, director general of the AAPA. “There are some signs that the slump in air cargo experienced over the past couple of years may be bottoming out, at least in volume terms, but surplus cargo capacity will continue to exert downward pressure on rates,” Herdman said.
Exceptions to the trend include air cargo through Hong Kong, currently the world’s biggest cargo hub, which expanded 2.7% in August. Mark Whitehead, chief executive of Hong Kong Air Cargo Terminals (HACTL), told Orient Aviation yields remained down but “the cargo is still there. The U.S. is in plus territory and intra-Asia is up,” he said.
Globally, the International Air Transport Association (IATA) has reported a continued modest improvement in air cargo markets in August, with demand up 3.6% over the previous year starting from April this year. “There are some signs of improvement in demand, but the air freight business remains very tough”, said IATA director general and CEO,Tony Tyler. “Freight volumes are only now reaching the levels of 2011 when the cargo business peaked with revenues of $67 billion. This year we expect $59 billion of revenues from air cargo globally. That takes the top line back to 2007 levels. But to earn that revenue, we will be moving nearly 17% more cargo and dealing with a 40% hike in jet fuel. The road ahead will be challenging.
“A rebound in trade growth from July, in response to the strength of developed markets, could be an encouraging sign,” said Tyler. “However, the region’s carriers will be facing stiffer competition for long-haul cargo. Airlines based in the Middle East, for example, have expanded their cargo business significantly (12.7% year-to-date). According to IATA, total freight traffic market shares by region are: Asia-Pacific 37.9%, Europe 23.6%, North America 21.4%, Middle East 12.7%, Latin America 3.0% and Africa 1.3%.
Airbus is focusing its freighter efforts on the medium-sized market and Hermann made it clear there are still no plans to produce an A380 freighter. A cargo version of the new A350 remained undecided.
Airbus’ forecast shows that overall worldwide air cargo demand by the year 2032 will require around 2,700 new and converted aircraft, almost double the current fleet. Over half of these will be needed for fleet replacement, driven by current old aircraft retirements, with the remainder for growth.
Eight hundred and seventy airplanes will be factory-built freighters worth about $234 billion and 860 will be passenger aircraft conversions. Another 175 airplanes in 2032 will be freighter aircraft in service today.
Airbus said mid-sized aircraft would account for the largest freighter segment, requiring almost 1,300 new aircraft in the next two decades, with the manufacturer well-positioned in the market with its A330-200F and A330-P2F (passenger to freighter conversion) airplanes.
Hong Kong Airlines, Malaysia Airlines and Yangtze River Express fly the A330-200F and BOC Aviation has ordered five, of which two have been delivered to the Singapore-based lessor.
“Illustrating the rise of the emerging economies as the fastest growing markets for air cargo, Asia-Pacific (including India and China) currently represents 36% (the IATA figure is 37.9%) of the world freight traffic, increasing to 42% by 2032,” said Herman.
“Overall, China is the single largest individual nation driving air cargo growth. China’s share represents 15%. By 2032, this will rise to around 22% of the global air freight market. By comparison, the combined developed nations’ share in Europe/CIS and North America accounted for 51% of the total traffic in 2012. Traffic will continue to grow but by 2032 their combined share of total world freight traffic will reduce slightly, to around 45%,” said Hermann.
Airbus divides the freighter fleet into three segments: small jet freighters (10-30 tonnes), mid-sized freighters (30-80 tonnes) and large freighters (80 tonnes and upwards). Small freighters account for about 23% of today’s fleet. The express freight market boom in China and India will boost the number of them from 380 in 2012 to more than 600 aircraft by 2032, their overall proportion of the world cargo fleet will decrease to around 21%.
“Mid-size freighters, with flexibility to adapt to changing markets, represent about 45% of the fleet in service and are increasingly used for regional express services and regional and long-haul general cargo operations,” said Airbus.
“Their numbers are expected to boom in the coming years driven by growth in emerging markets, especially in China. The mid-size segment is forecast to expand to over 1,290 units by 2032, up from 744 units at the end of 2012. In doing so, this category will retain its dominant 45% share of the world freighter fleet”.
Meanwhile, large freighters, which hold about 32% of the current world fleet, and are mainly used on long-haul operations between the U.S., Europe and Asia will climb above 1,000 aircraft by 2032, slightly increasing its share of the world freighter fleet.
