July air cargo figures issued by IATA and others indicate a pickup in air cargo demand during the past two months. Hopefully this is a sign for embattled Far East carriers as far as cargo transport is concerned. Whereas carriers such as Air China, Cathay Pacific and Qantas, just to name a few, are being flooded with passenger volumes – air cargo during the past six months has proven to be very weak.
A pickup in the China export and Far Eastern regional commodity demand would seem to be the answer to their cargo woes.
This could well be the case as IATA’s July figures show that Asia Pacific airlines have experienced a 7.1% rise in Freight Ton Kilometers (FTK’s) which is apparently due to the start of a recovery in the Emerging Asia trade volumes.
In comparison to Europe, Asia is seen to be on the road to recovery as far as economic performance is concerned.
Some, even venture to say that the so called yearend rush will be a bonus one this year.
Let’s wait and see on that.
Will this really be the case?
Asian airlines were hard hit on cargo in the first half of this year.
Air China for example had a profit fall of almost 80% in the first half of this year.
Much of this can be attributed to the severe currency fall between the Chinese Renminbi and the US$ as well as volatile economies and higher fuel prices.
Average load factors on the cargo side were only around 55% - 58% although tonnages had risen somewhat compared to the year before but, yields, due to capacity overflows, remained low.
Cathay Pacific and Dragonair together saw cargo yields drop by around 7% although they carried over 9% more cargo than in the first half of 2013.
Cathay itself shows a capacity increase in belly space of 11% in the first six months of 2014. Much of this is due to the introduction of more and more Boeing 777 passenger variants on their routes.
AirAsia - although not a cargo barometer for the region also showed a large decline in yields despite cargo revenues being up by 48% on last year.
Here, it seems to be the same sickness as with the other carriers.
Too much capacity, higher fuel and operational costs.
At the other end of the region, Qantas Airlines cargo EBIT (earnings before tax and interest) dropped by a dramatic 30% to US$ 22.3 million. The QF management is in the middle of a so called “transformation process” in order to try and bring the carrier back on track.
The above are just a few of the region’s carriers. Most will have been singing the same song as far as January - June is concerned.
So, will the July figures show a positive trend for the rest of 2014?
Let’s hope so and let’s hope that the yearend rush does materialize.
The IATA figures give reason for hope by showing a growth in air freight demand in July of 5 percent.
Interesting to note is that July is the third month in a row where demand for space was greater than actual capacity increases.
There seems to be an increase also in demand for exports from Asian regional manufacturing hub areas.
However, a sobering warning has come from the Association of Asian Pacific Airlines (AAPA), that there is still too much belly capacity on offer which is pushing down rates and consequently yields and that profits for the carriers are still way below acceptable levels.
John Mc Donagh