Air cargo in Asia Gaining momentum

Asia, which enjoys the geographical advantage of being at the crossroads of trade, constitutes the strongest air cargo market in the world. Although the days of double digit growth rates are gone, the Asian air freight industry can achieve a healthy plus of five percent on average year by year, believe industry players. Moreover, export […]

Asia, which enjoys the geographical advantage of being at the crossroads of trade, constitutes the strongest air cargo market in the world. Although the days of double digit growth rates are gone, the Asian air freight industry can achieve a healthy plus of five percent on average year by year, believe industry players. Moreover, export and import volumes in the region have complemented each other over the past years.
Asia has, over the years, witnessed the emergence of many production hubs. Traditionally, China is a key manufacturing hub for various goods including garments, high tech products, and a full range of other consumer products. This is mainly due to the comparatively lower cost of production, cheaper labour, abundance of resource and land, and sometimes local governmental support in growing the production of consumer products.
The key manufacturing centers of Foxconn in China for the production of Apple smart phones are classic examples. The upcoming World Cup in Brazil has brought forth multiple local demands from consumers in Brazil for television sets, in particular medium priced television manufactured in China. All of these contributed to a fast growth in air freight from China to the rest of the world. The China coastal regions plus the China Inland have combined to make China a major air freight contributor, domestically and internationally.
It is widely expected that Asia will continue to position itself as a key manufacturing hub for commodities needing air freight, especially fashion and high tech products. Electronics and machinery have been driving the air cargo demand in Asia. In addition, there’s an increasing demand for the transport of special cargo like pharmaceuticals. That will sustain intra-Asia air freight growth and also support the flow of cargo through Asia to trans-Pacific lanes.
“Asia remains a dominant contributor to the air cargo market and intra-Asia growth continues to provide significant new flows within Asia, which is supported by the growth in belly capacity in Asia,” said Vikram Singh, managing director-Middle East & Asia Pacific, Air Logistics Group.
According to Khaw Hock Eng, general manager, Asia Airfreight Terminal (AAT), “Asia will continue to play a significant role and strong position in the world air cargo industry, especially driven by the growth of the markets in People’s Republic of China and India.”
Agrees Lutz Grzegorz, vice president, Shanghai Pudong International Airport Cargo Terminal (PACTL), “Asia’s air cargo industry sees growth in the domestic markets. Especially the air cargo industry in mainland China continued to increasingly show a development above average during the last couple of years.”
“In the case of Hong Kong, we have the advantage of being a major transshipment hub connecting China and the rest of the world over the past decades. A lot of the intra-Asia cargo assembled in Hong Kong for consolidation, then gets flown to major overseas export markets via big freighters of many major Asia Pacific carriers that operate from Hong Kong,” elicits Lilian Chan, executive director of Hong Kong Air Cargo Terminals (HACTL) explaining Hong Kong’s positioning in the Asian air freight market.

Challenges
Airlines generally are facing a tough operating environment given high fuel costs, low yield and highly competitive markets. A number of initiatives that require capital investment or major / additional resources input have got handily shifted onto the shoulders of ground handlers. “For the case of Hong Kong, labour shortage at the airport is becoming more acute, and the cost of acquiring and retaining quality staff is quietly zooming up. Airlines have the tendency to outsource more labour intensive activities to ground handlers especially in the areas of administration and supervision that traditionally used to be airlines’ responsibilities,” clears Chan.
Elaborating on the hurdles, Asia Air Freight Terminal’s Khaw Hock Eng, general manager, Asia Airfreight Terminal says, “The challenges include excess terminal capacities in Hong Kong, increasingly competitive landscape, higher service standards, tight labour market, etc.”
However, Khaw Hock Eng believes that the market would likely be stabilized in the longer term when the market growth comes through steadily. “With the current airport expansion plans by Hong Kong International Airport, we certainly hope to see the growth coming about sooner,” he said.
Even as the overall outlook for cargo remains grim, volumes are gaining ground. “The outlook for cargo is still challenging given structural over-supply in the market place, weak demand and high fuel prices. Overall volumes are slightly improving; however yields remain under pressure due to intense competition, both from other air-freight carriers and sea-freight. It is hoped that this year will see a longer peak season in Q4 as global demand continues to recover,” deems Mark Sutch, general manager, cargo sales and marketing of Hong-Kong based airline Cathay Pacific.
On the GSSA side of the business, Air Logistics Group’s Vikram Singh believes the main challenge is to manage volatile pricing. “The slowdown in demand compared to capacity growth in Asia has put increased pressure on volumes and yield,” Singh added.

The road ahead
In the recent years, other Asian locations such as Laos, Bangladesh and Vietnam have been buzzing with activity. Particularly, Vietnam has witnessed significant growth in air freight with materials flowing in for manufacturing, taking advantage of the cheap production cost base there, and finished manufactured products coming out, going via other more significant air cargo hub like Hong Kong for export.
Even as the overall market outlook is not without turbulences, HACTL remains cautiously optimistic for the growth of air freight in the medium to long term. “Given all the figures of the confidence index, CAGR analysis etc for the various major markets notably China, South East Asia and USA, it is to be expected the cargo growth and volume for these regions will continue to be strong this year,” believes Chan.
Asian markets will continue to lead the industry growth, with the three major lanes: Asia to North America, Asia to Europe and Intra Asia remaining distinctively strong. Middle East will still continue to grow, with addition of new airport facilities and infrastructures facilitating air freight movement and handling, and the continued investment in bigger, more cargo friendly aircraft by the various big airline players in the Gulf region will see a sustained growth of air freight to and from the region to Asia.
If the forecasts about freighter deliveries for the upcoming 20 years are true: the Asia Pacific will no doubt continue to be a major growth pillar of air freight, with Asia Pacific carriers generally having additions in large size freighters. 

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