Far East market slow yet expanding

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The Far East market, comprising of major air cargo destinations such as China, Hong Kong, Japan, South Korea, Singapore and Thailand, has a vital role to play in the global air cargo industry. Namrata More...

Developing countries in the East Asia Pacific region will see stable growth this year, bolstered by a recovery in high-income economies and the market’s modest response so far to the Federal Reserve’s tapering of its quantitative easing, according to the East Asia Pacific Economic Update report by World Bank. Successful reforms in China could bring considerable benefits to trade partners supplying it with agricultural products, consumption goods and modern services. Conversely, spill overs from a disorderly rebalancing in China could hurt regional and global growth, especially in countries relying on natural resource exports. According to an IATA report in April, Asia-Pacific carriers saw cargo demand grow by 5.2 percent year-on-year. The strength of this performance is exaggerated by a comparison to a particularly weak April 2013. Ongoing weakness in Chinese manufacturing activity is likely to impact air freight demand in coming months, and export volumes in emerging Asian markets have been in continuous decline throughout 2014. However, it is interesting to note that capacity rose 7.8 percent. This July, Air France is adding Jakarta, Indonesia, to its extensive international network with a daily Boeing 777-300ER service, via Singapore. The carrier considers Indonesia to be one of the fastest growing markets in the Asia-Pacific region, with estimates around the 6 percent growth mark for both 2014 and 2015. Textile and electronics are the main export commodities out of Jakarta. This daily Air France service out of Paris will complement the daily B777-300ER KLM service out of Amsterdam-Schiphol, strengthening Air France-KLM-Martinair Cargo’s footprint in Indonesia with a daily offer of up to 15 pallets. Cargolux Airlines International S.A. also recently announced the launch of scheduled services between Luxembourg and Zhengzhou after obtaining all necessary permits from the relevant authorities. From July 2014, the airline plans to operate four weekly services while an additional two weekly frequencies will be added from September this year.“China will be the area of growth for Cargolux going forward. We have just had our inaugural flight to Zhengzhou and we plan to increase these flights to once a day to the end of the year. And mid-term plans are to go to three flights a day. So, this is the new destination and also the hub of our new shareholder,” said Dirk Reich, CEO, Cargolux.The implementation of regular air freight services between Luxembourg and Zhengzhou is a major element of the commercial cooperation agreement between Cargolux and HNCA. In addition to Zhengzhou, Cargolux also operates all-cargo flights to Beijing, Shanghai and Xiamen in Mainland China. Hong Kong Air Cargo Terminals Limited started off this year with the January cargo volume at 144,564 tonnes, a 12.5 percent growth compared to 2013. February was a traditional slower month with the monthly tonnage at 95,947 tonnes, followed by a rise to 164,387 tonnes in March, a 15.3 percent Year-on-Year growth. Mark Whitehead, Chief Executive of Hactl, said in the statement: “We had a good start of the year with some new airline customers and increased volume of our existing customers. In February, we successfully handled the second largest horse shipment with 65 horses flying in to Hong Kong for an equestrian event. The March tonnage was as high as the pre-Christmas peak in November 2013. The overall result of the first quarter was satisfactory.” Hong Kong based Cathay Pacific and Dragonair carried 138,448 tonnes of cargo and mail in May, an increase of 13.9 percent compared to the same month last year. For the year to the end of May, tonnage rose by 7.3 percent while capacity was up by 10.9 percent.Cathay Pacific general manager cargo sales & marketing Mark Sutch said: “We saw an upswing in demand out of the key Hong Kong and Mainland China markets in May, though the rumours of major product launches failed to materialise. Demand on the transpacific lanes remained robust, boosted by the beginning of the fruit season out of the US. However, the momentum in Europe continued to be weak and we trimmed back our freighter schedule to the continent accordingly. Intra-Asia demand was generally in line with expectations though exports out of Dhaka continued to be affected by the unrest in Bangladesh.” Meanwhile Changi Airport Group has taken active steps to sustain the long-term growth of the air cargo sector. Notwithstanding the tough operating environment faced by the cargo industry in Asia, Changi Airport handled 598,000 tonnes of airfreight movements in the first four months this year, representing a 0.1 percent growth compared to the same period last year. “While the outlook for the global airfreight sector remains uncertain, we are committed to our airline partners in providing support where needed. We will work with them to explore new opportunities and respond to emerging industry trends so as to sustain growth over the long term for the airfreight sector,” said James Fong, assistant vice president, cargo & logistics development The Group also welcomed the arrival of ANA Cargo’s inaugural flight from Okinawa, Japan, a new freighter city link for Changi Airport. With strong demand for fresh and high-quality Japanese food products, this new service will widen distribution channels for these products to Singapore and its neighbouring markets. ANA Cargo will also be able to tap on dedicated temperature-controlled facilities at Changi Airport to extend the cold supply chain for perishables and pharmaceuticals, as well as increase transshipment cargo loads to Southeast Asia and South Asia. The airline so recently relocated its Asia Cargo Office from Hong Kong to Singapore, which serves its networks across Southeast Asia and South Asia. As for market trends, it has been observed that in the coming years, a major chunk of the air cargo growth in the Far East region will be dependent on budget carriers that represent 15 percent of the aviation market here. “We need to understand the crucial needs of these airlines as they will be leading the market,” said Mike Hewitt, regional manager of Asia for ECS Group. The general sales agent services provider currently has a network in 32 offices with Far East region holding a key place its strategy. “We were successful in gaining Tiger Airlines to sell cargo and create a product line they can build on,” said Hewitt. Tiger Airways Holdings Limited had signed a strategic cargo partnership agreement with ECS Group appointing it as a partner for its cargo operations business. Under this partnership, ECS represents and markets Tiger’s cargo space on the Group’s fleet of A320 aircraft. Overall, the Far East market will continue to expand despite the slowdown in air freight. What is to consider is that belly capacity and intra-Asia movement of goods could be the dominant factors. 

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