Is Asian air cargo on the road to recovery?

October data from the Association of Asia Pacific Airlines indicate declines in Asian international cargo may be stabilizing. For the month, freight tonne kilometers (FTK) increased 2.1% from October 2012. However, there was a 4.0% increase in freight capacity. Year-to-date FTKs remain negative, down 1.3%.

Capacity remains a problem. Comparing just October FTKs since 2010, the CAGR growth has declined by almost 3.0% whereas the FATK (freight available tonne kilometers) has not kept pace with actual moved tonnage and has only declined 1.3% for the same period.

Still, the year-over-year FTK increase was due to some improving factors noted in October such as increasing demand from Europe and the US and new product launches by the likes of Apple, Google, Samsung and Microsoft.

The changing dynamics within the global freight transport has been a struggle for many Asian cargo carriers. Cathay Pacific noted a 1.0% decline in tonnage for October while increasing capacity 1.9%. While its monthly tonnage declines have decreased, according to its CEO, the carrier’s weekly cargo revenue remains about 25.0% lower than three years ago.

Also, disappointing second quarter (period ending September 30) data from Singapore Air resulted in the airline to observe that cargo demand will remain flat due to weak international demand and excess capacity in the market. Therefore, the airline expects cargo yields to remain under pressure.

Meanwhile, EVA Airways, Taiwan’s second-biggest carrier, announced plans to reduce its freighter fleet by more than a third because of the smaller size of electronic products and the popularity of handheld devices. The President of EVA noted that it is “difficult to find cargoes to fill a freighter”. Indeed, other air cargo providers are looking towards food and perishable items, pharmaceuticals and medical equipment and other high-value goods to fill the bellies but it remains difficult as excess capacity continues to be an issue and competition among other airlines is high.

For example, China Eastern noted an almost 5.0% increase in cargo during October following a September decline of over 4.0%. The airline is looking towards the food and perishable industry and recently announced plans to run two charter flights from Santiago airport, Chile to Shanghai Pudong International beginning in December for delivery of Chilean cherries to the Chinese market.

It still is too early to tell if international cargo from Asian airlines has truly stabilized. Monthly data from the Association still indicates an erratic trend and will likely continue as competition with Middle East airlines intensifies and the global economy continues its sluggish improvement.