Incendiary phones spark air cargo surge
AIR CARGO leaders are cautiously optimistic about a rebound in the business following an unexpected uptick in volumes in September, writes Thelma Etim.
In the month, global demand, measured in freight tonne kilometres (FTKs), rose 6.1 per cent year-on-year – the fastest pace of growth since the disruption caused by the American West Coast seaports strike in February 2015, reveals the International Air Transport Association (IATA).
Freight capacity, measured in available freight tonne kilometres (AFTKs), rose 4.7 per cent over the same period, although load factors remained historically low, keeping yields under pressure, the airline association notes.
“September’s positive performance coincided with an apparent turnaround in new export orders in recent months,” offers an IATA statement.
Air cargo surge assisted by collapse of Hanjin
Other factors which have contributed to the cargo surge include the rush replacement of Samsung Galaxy Note 7 phone devices during the month, as well as the early repercussions from the collapse of the Hanjin marine shipping line at the end of August, it adds.
David Shepherd, head of commercial at IAG Cargo – the freight arm of the holding company of British Airways, Iberia, Vueling Airlines and Aer Lingus – underscores the recent improvement in air cargo traffic.
“Over the past few months in particular we have seen encouraging signs with regard to improved demand and while some routes continue to be under pressure from a load factor perspective, there is cause for cautious optimism,” he tells aircargoeye.com.
Widespread passenger bellyhold overcapacity, a thorn in the side of all legacy carriers, appears to be decelerating too.
“One point of difference that we’re seeing in the current [air cargo industry] slowdown is that it is partnered with an increase in capacity, Shepherd reveals.
“While this excess capacity remains a relatively consistent feature, signs are pointing to a slowdown in the rate at which capacity is increasing.”
Amidst the relentless downwards pressure on yields caused by increasingly competitive freight rates, IAG Cargo is among some market leaders, including Qatar Airways Cargo, Lufthansa Cargo, Kuehne + Nagel, Panalpina and haulier Jan de Rijk, which are seeing favourable returns from investing heavily in the carriage of expensive, specialist pharmaceuticals and life-sciences products around the world.
This development comes as no surprise given the robust revenue growth of the global pharmaceuticals market. Expenditure on medicines fuelled by state healthcare reforms is rising faster in the growth economies, such as China, Brazil, Russia and India, observes global business consultancy PricewaterhouseCoopers.
Some organisations have responded to the increase in pharma traffic. For example, Lufthansa Cargo has been newly awarded IATA’s Centre of Excellence for Independent Validators in Pharmaceutical Logistics (CEIV Pharma) certification, which addresses standardisation in levels of safety, security, compliance and efficiency in the transportation of pharma.
Big air cargo players focus on specialist premium services
Alexis von Hoensbroech, board member of product and sales at the German cargo carrier, comments: “Pharmaceutical shipments are extremely challenging and demand maximum reliability from airlines.
“Being one of the first airlines worldwide to receive IATA’s new international certificate is the fruit of the work we have done on our Cool/td product over the last few years.”
IAG’s Shepherd says specialist premium shipments, such as pharmaceuticals travelling under its Constant Climate product, are more resistant to the yield pressures, which for years have been casting a pall over the general air cargo business.
“While we see capacity increasing in the [general] market, we are not necessarily seeing a parallel increase in the ability of carriers to handle these specialist products which require very significant levels of investment,” he asserts.
“We have made the decision to commit to this investment and our proven ability to handle specialist freight has meant that the yield has been more resilient.”
Premium product services have emerged as a much-needed shot in the arm for some air cargo companies as they continue to seek ways to minimise the effects of the ponderous state of global trade and the protectionist stance some countries have been adopting.
The World Trade Organisation revealed in July this year that 22 new trade-restrictive measures per month were initiated by member states between mid-October 2015 to mid-May 2016.
Alexandre de Juniac, chief executive of IATA, is nevertheless encouraged by an apparent strengthened demand in airfreight, along with recent new global trade deals. The free trade agreement between European Union and Canada following seven years of wrangling is, for example, “good news for the economies involved and for air cargo,” he says. This ‘comprehensive economic and trade agreement’ eliminates nearly all import duties, saving European exporters around €500 million a year.
“It is a welcome respite from the current protectionist rhetoric and positive results should soon be evident,” De Juniac notes. “Although, with growth in world trade virtually at a standstill, the air cargo sector still faces some major hurdles,” he warns.