AAPA gives cause for cautious confidence

In its operating figures for September 2014 the Association of Asia Pacific Airlines (AAPA) reported steady growth in air freight demand. Measured in freight tonne kilometres (FTKs) the steady increase registered at 5.3% year-on-year. Meanwhile offered capacity rose by 4.0% which in turn pushed load factor up to 64.1%, an increase of by 0.8 percentage points compared to September 2013. This rising demand is perhaps the cause of the recent rise in confidence in the region’s air freight industry recorded in the Stifel Confidence Index. But there is still a degree of uncertainty as growth is still modest and not clearly visible across the market.

AAPA’s Director General said that this growth was, “Sustained by regional economic growth,” but added that, “Whilst we are seeing sustained growth in both passenger travel and air cargo demand, market conditions remain quite challenging.” After all these growth rates are set against rather uninspiring year ago figures. The Asian air freight market has not really achieved any serious growth since the initial recovery from the financial crisis of 2008, even now it languishes well below the peak of the recovery in October 2010.

Air cargo is of course highly seasonal, especially in the Asia Pacific region with the impact of Chinese New Year. September 2014’s growth would appear to reflect that seasonality with demand rising along with autumn releases of high tech consumer goods. Indeed global sales of semiconductors rose by 8% year-on-year and in Asia Pacific that figure was even higher at 12%, though sales did decline in Japan.

The growth was not reflected by major Asian cargo airports either as volumes at Incheon, South Korea, Narita, Japan and Singapore all remained basically flat in September. Even Hong Kong, which did see growth, failed to recover to its July level. Modest is then the operative word for the growth of air freight in the region.

The industry itself is investing in these rising volumes, with DHL, UPS and Cathay Pacific all having launched new services in the region since the beginning of September. These companies each site rising demand as their reason for expansion. Of course manufacturing and exports from the region are growing and the emerging economies of South East Asia, which these new services primarily cater to, are growing at the fastest pace.

In line with the launch of these services, and growing consumer demand, we have seen confidence in air freight exports out of Asia rise quite sharply since the aftermath of Chinese New Year. In fact since August the Stifel Confidence Index has risen by 8.4 points to 59.9 in October 2014. Predictions of the growth in exports and intensifying intra-Asia trade may well buoy confidence in the index further as the Holiday season approaches. But while indicators of growth remain subdued confidence is likely to be pegged back too.

To have your say on the future of the air freight market, and for a chance to win a free iPad, you can take part in the latest Stifel Confidence Index survey here.