China-US air freight is not normal

E-commerce driven freight out of China is booming apparently. Anecdotal reports suggest that a huge proportion of air freight moved out of China is consignments from Shein and Temu bound for American consumers.

However, the picture is complicated. Certainly, the air freight market is growing as is the air passenger sector, yet the China-US route has pursued a strange trajectory. Data from several sources illustrate that that passenger flights between the two countries have never regained the intensity seen in 2019. For example, numbers from the air transport data source CAPA/OAG show that by 2024 the US was the 13th largest origin/destination for Chinese flight services, down from 6th in 2019. Even Russia is a larger market than the US for China at present.  

Of course, the reason for this is US government policy. The American airlines have pressed the Biden administration not to grant greater access to Chinese airlines citing “existing harmful anti-competitive policies”. They seem to have had their wish fulfilled.

These flight service restrictions are being applied in the face of a strong airfreight market. The latest numbers from IATA show that the global air freight market grew by 14.7% year-on-year in May, whilst the Asia-Pacific market was up 18.1% year-on-year. Load-factors are not particularly high at 44.6%, but are rising.

This is also reflected in the results from Cathay Pacific, a Hong Kong based leading passenger and cargo airlines in the Asia-Pacific region. It saw its cargo business grow by 10.2% year-on-year in May whilst passenger service were up by 18.4%. Cathay is furiously introducing new capacity, with the number of ‘seat kilometres’ up 45% over the past year, yet utilisation has only edged-down. Cathay Pacific described the cargo market out of Hong Kong and the Pearl River Bay area as “ ‘solid’ with particularly strong growth from Hong Kong, the Chinese Mainland, the Taiwan region and Southeast Asia”. In terms of the composition of cargo “there was also an increase in tonnage of general cargo as well as special cargo, with significant movements of high-end electronics, seafood and consumer products” whilst “E-commerce continued to perform well”.

Therefore the US- mainland China air freight market might be described as reflecting the sort of ‘geo-political’ risk that has become so characteristic of the contemporary global economy. The effect of limits on passenger services mean that the prospects for belly-freight services between mainland China and the US look restricted. This might imply that freighters may have an opportunity.

Author: Thomas Cullen

Source: Ti Insight

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