Some Asian airlines, including Cathay Pacific and Nippon Cargo Airlines (NCA), are planning to ramp up their freighter flights across the Pacific in the coming peak season, but there are more doubts than answers at this point how strong the pre-Christmas business will be for the air cargo industry.
Nobody expects to set records. Christmas came early this year for airlines. The problems at US West Coast ports produced bumper volumes for carriers at premium rates as shippers were scrambling for capacity – even using European airlines to move cargo from Asia to the US. It was a scenario strongly-reminiscent of peak seasons before 2009, when the global economic downturn slashed volumes and prompted shippers to look for low-cost alternatives to airfreight.
After such a strong start to the year, the coming peak season always looked unlikely to push the industry to new heights.
“Shippers in Asia anticipate moderate growth as the year wears on, but nothing like a ‘peak season’ as the industry has traditionally defined it. Most of the Asia-origin business that moved to air during the port strike is returning to the sea,” said Jan Krems, president of cargo at United Airlines.
If anything, the surge in traffic in the first quarter has made it harder to predict how the rest of the year will shape up, said Shawn McWhorter, president for the Americas at NCA.
Most operators have no clear indication at this point what lies ahead.
“Many customers say they’re focused on the final weeks of the second quarter and getting through the summer, and they don’t yet have a positive or negative feel for what the peak season will bring,” noted Krems.
Airfreight developments in April have added to the uncertainty. After the strong growth in the first quarter of the year the momentum slowed visibly, showing an increase of 3.3% worldwide, according to IATA, the international airline body. In the first quarter growth had been 5.3%. Moreover, only carriers based in the Asia-Pacific region and from the Middle East registered ongoing growth; for North American airlines, the momentum was flat.
What is even more worrying is the fact that yields are under pressure again. In the Asia-Pacific region, volumes climbed 4.5% in April, but this lagged markedly behind capacity, which grew 7%.
According to WorldACD figures, yields have dropped as much as 11% from a year ago, despite the lower operating costs in the wake of weaker oil prices. The eventual resurgence of oil prices is expected to hit yields once again, some operators have warned.
On a brighter note, carriers have registered some optimism among their clientele.
“We’re pleased to report that a few key customers are confident in seeing some peak strength this year,” Krems declared.
NCA has also picked up some moderately upbeat signals from its clientele. “The pre-sales and interest from forwarders for the extra capacity out of Asia is good so far, so we are optimistic that we will see continued improvement in the demand in 2015. There is not one particular segment that is dominant right now, but the forwarders seem to be okay to purchase the capacity,” McWhorter said.
The Japanese carrier intends to beef up its frequency between Asia and North America during the peak season, matching its capacity fielded last year.
“The peak season of 2014 was very good, and we are planning to operate the same schedule in 2015, which means 2-3 extra flights from Shanghai and Hong Kong to the US each week,” McWhorter stated.
Cathay Pacific also plans to boost its transpacific freighter schedule. The airline is currently operating 37 all-cargo flights a week across the Pacific, and management intends to go up to 43 in the peak season, revealed Mark Sutch, general manager of cargo sales and marketing.
“Asia-Europe has continued the trend of being a tough market and our capacity ramp-up accordingly in the peak will be less significant than transpacific. We expect to operate 11 weekly freighters from Hong Kong to Europe in addition to our all B777 belly capacity,” he added.
Trying to identify catalysts for airfreight growth in the peak season is difficult at this point, Sutch remarked, as there has been little talk of new blockbuster products to be launched. He hopes that capacity negotiations in the weeks ahead will give him a clearer picture.
“Clients are planning for a peak and year-round block space agreements are structured accordingly. Over the coming weeks we have many meetings arranged to firm up plans for BSAs,” he said.
By Ian Putzger
Air Freight Correspondent | Toronto