FREIGHTERS WORLD, DECEMBER 2017 FEATURE: ASIA 19

Asia air cargo in high gear Photo: Sanit Fuangnakhon / Shutterstock.com Photo: DHL freighter at

An exceptional peak season out of Asia is evidenced by DHL planning an extra 100 freighter flights to cope with surging demand, writes Donald Urquhart

OVEMBER and December are have been phenomenal over the last few ation out of China is very tight now and Asia’s two busiest months. years,” Allen adds, citing an average vol- of course it has started to impact yields,” “We see a peak every year, ume growth rate of 12% year on year out says Sergey Lazarev, general director, ABC. but this year we are anticipat- of . “Yields out of Asia throughout the whole Ning a growth of over 20% year on year on The current peak season situation con- year were higher than last year’s levels and an already big peak. So we’ve got 100 extra firms what freight forwarder Panalpina now with the supply-demand situation, freighter flights operating over that peri- warned of back in late July. yields continue their growth,” he adds. od, just for Asia,” DHL Express chief execu- “The Far East peak season is expected to And it is not just Asia-Europe that is tive Ken Allen tells Freighters World. start earlier and be even stronger than last feeling the squeeze, likewise the transpa- Allen made the comments ahead of the year’s,” it said as it urged shippers to book cific is seeing a similar situation according integrator’s announcement that it is in- their capacity early. to United Cargo’s Mirco Renfer, vice presi- vesting €335m to expand its Hong Kong Clearly, not everyone heeded their ad- dent of Asia Pacific sales. Central Asia Hub (CAH) by 50% to handle vice as a number of small and medium- “The Asia market has performed very 1.06m tonnes a year, when ready by 2022, sized forwarders that Freighters World well for the entire year and this positive to coincide with Hong Kong International spoke to in early November said capacity trend has strengthened, now that we’ve Airport’s completion of the much needed was rapidly becoming scarce out of Asia entered peak season. third . with the very real possibility of backlogs. “Yields both to and from China have Of these additional flights, 74 will be from Barely two weeks later, the same for- been trending up consistently since the be- Hong Kong and the remainder out of DHL warders confirmed that the expected ginning of the year, and they are advancing Express’ North Asia Hub at Pu- backlogs have become a reality. more rapidly as we enter into peak season.” dong airport (PVG), says Tony Khan, general AirBridgeCargo (ABC), which has a keen He adds: “All ex-Asia markets are per- manager of DHL Express’ Central Asia Hub. focus on Asia, also notes that capacity is forming very well, but not all origins have “The growth rates we’ve seen around tight out of the region. the lengthy history that enables compari- the world, but especially out of Asia, “We can admit that the capacity situ- sons to the past. Among established mar- 20 FEATURE: ASIA FREIGHTERS WORLD, DECEMBER 2017

kets, I would single out Japan and Hong Whitehead adds that the growth figures Kong as reaching demand levels that we will likely moderate by the end of fourth haven’t seen since 2012. quarter, simply because 2016’s like period “In Japan, in particular, capacity gains was influenced heavily by the Hanjin con- have usually equalled or surpassed rising tainer line collapse, which created a larger demand in recent years – with limited ex- peak than normal. ception periods such as the US port strikes ‘Yields both to and from China have been The cargo terminal’s SuperLink China a few years back. But this year the demand trending up consistently since the begin- Direct RFS road feeder services are also from the electronic and automotive sectors ning of the year, and they are advancing performing well he says, in reference to of the Japan export market has reversed more rapidly as we enter into peak season’ the bonded trucking network throughout the long-term trend.” Mirco Renfer, southern China, which is operated by the The surging demand is being driven by United Cargo terminal’s Hong Kong Air Cargo Industry a number of factors, says Lazarev, includ- Services Ltd (Hacis) subsidiary. ing the launch of much-anticipated high- “Improvements in global trade senti- ABC’s take on the Asia cargo market is tech devices, a series of festive holidays ment have delivered a robust 10% growth similarly upbeat, with Lazarev saying that worldwide, e-commerce purchases and in air cargo volumes, a welcome develop- the economy of the East and South Asia tight capacity as a result of rationalisation ment for Asian carriers which account for (ESA) region continues its momentum in recent times. This has impacted yields, nearly 40% of global air cargo traffic,” ob- with GDP growth estimated at 6.1% in the pushing them higher, as well as facilitat- served Andrew Herdman, the AAPA direc- third quarter. ing charter business, he adds. tor general, speaking at the group’s annual For ABC this had translated to a 15% up- The -based carrier says it ap- presidents gathering in Taipei in October. tick over the first 10 months of 2017 to/ proached the peak season “well-prepared” The figures speak for themselves, with from Asia. and as a result expects solid 2017 fourth- WorldACD Market Data noting that Asia- “During 2017 we have witnessed stable quarter results, based on 14% growth of Pacific is the only region of the world demand for exports from Asia (up 12%), ABC cargo tonnage for the first ten months maintaining year-on-year double-digit but what is even more important is that of 2017. “Our enlarged fleet of 18 freighters, volume growth in September, at 12.3% for the growth rates for imports to Asia to the and recently deployed brand new B747-8F, outbound and 11.3% for inbound cargo. majority of stations have reached double- offer enough capacity to accommodate The data analytics company notes that, digit growth and reached 20% from Eu- additional volumes,” Lazarev says. through the first three quarters of the rope, including high growth of automo- He adds that a well-balanced network, year, Asia Pacific saw growth of 14.2%, tive goods and medical equipment, as well with newly integrated destinations in Asia placing it as the best performing region as healthcare products,” he says. (Taipei) and Europe (additional Munich in the world in terms of volume growth, The demand to/from Asia has been and Liege), provides extensive transporta- consolidating top position in the world’s even more robust during the last quarter tion linkages with connectivity options air cargo business. of the year, he adds, saying the star-per- through its hub at Moscow Sheremetyevo Asia Pacific can add the distinction, it forming import destinations for ABC in airport. says, of being the only area with double- Asia this year include Shanghai, , digit yield growth year on year for each , and , where import Asia growth story month in the period January-September. traffic has doubled year on year. From an While clearly a welcome development, the Hong Kong Air Cargo Terminals (Hactl) export perspective there is high demand peak season is only part of the story. chief executive Mark Whitehead con- from all ABC stations out of Asia. It is a dream end to what has been a ban- firms that, at the busiest cargo airport in ner year for the industry and one that gen- the world, Hactl continues to experience Changing fundamentals erally confirms a basic truism — when air strong throughput volumes, in line with As AAPA’s Herdman notes, the nature of cargo is doing well, air cargo in Asia is typi- the trends throughout 2017. the air cargo beast in Asia is changing: cally doing very well. “Traffic to and from China at Hong Kong “Asia is not just the factory of the world, “Over the last two to three decades Asia is up 12.4% on 2016, but is also a rapidly rising consumer of has become the epicentre of economic while our total volumes are up 14%. We ex- goods as well.” gravity and a major manufacturing re- pect a strong fourth quarter, too,” he says. Certainly this is a welcome change as no gion, with more and more carriers open- ing up new destinations to serve growing appetites of European and American con- sumers,” says Lazarev. For this very reason, this region has been the backbone of ABC’s strategy from the beginning of its opera- tions as the company continues to expand its footprint and introduce more destina- tions to meet the needs of its customers. The strong performance of the region was also recognized by the Association of Asia Pacific Airlines (AAPA), which noted that the solid expansion in international air cargo markets continues unabated, outpac- ing the growth in offered freight capacity. ABC B747 freighter at Sheremetyevo FREIGHTERS WORLD, DECEMBER 2017 FEATURE: ASIA 21

with ‘netizens’ becoming more tech-sav- vy, creates bi-directional volumes requir- ing fast and reliable services, he adds. E-commerce is indisputably a key game changer and Whitehead similarly points to its rapid growth in China, fueling strong growth in airfreight exports and imports. Hactl’s value-added logistics arm, Ha- cis, is increasingly involved in this sector and through its collaboration with postal authorities has developed a fast and cost- effective route for export mail. Hong Kong's Hactl has experienced strong growth in 2017 This mail containing e-commerce elec- tronics items is now generating over 1,000 longer do carriers struggle with the prob- had an obvious and recognisable effect, mail bags per day, which then travel on lem of imbalances that used to plague this year the iPhone is one more factor Hactl client carriers, says Whitehead, add- the Asia-Europe and Asia-US trade lanes contributing to the robust market”. ing: “This is good news for them and for us.” where full cargo holds out of Asia saw Stronger underlying fundamentals Pointing to the huge growth potential only minimal loads on the return. have helped build a more solid cargo mar- of China’s Singles’ Day e-commerce festi- Similar sentiments are expressed by At- ket, says Renfer. val, he says that Alibaba’s plans to make las Air Worldwide Holdings’ chief execu- He adds that the current expansion this Chinese event into a global shopping tive William Flynn who says: “Growth in of the ex-Asia market began back in the phenomenon “will have some exciting Asia and an expansion of the global middle third quarter of 2016. impacts for air cargo, and Hong Kong and class are transforming the global economy. This was driven by growth in a variety Hactl are ideally located to benefit”. “Increased disposable income will sup- of commodities including electronics, au- The importance of e-commerce cannot port a strong future for global trade and tomotive parts, garments/textiles and be underestimated as it has become a key the consumption of goods. e-commerce, along with an increasing de- driver of peak season volumes, says Lazarev. “Our strategic focus on express and e- mand for pharmaceutical products. “Over the last couple of years the peak commerce service and the faster-growing Lazarev agrees, saying that Asia’s devel- season is e-commerce-linked, with a Asian markets positions us for further opment has occurred at a fast clip with its row of holidays following one-by-one — business growth as we carry through the role as manufacturer for the world evolv- Thanksgiving and Cyber Monday in US, balance of 2017, into 2018 and beyond.” ing over time. Chinese Singles’ Day, pre-Christmas rush ABC cites the example of Singapore in “High-tech production facilities are in Europe and North America.” terms of the changing structure of Asian growing at a very high speed in the region, A major part of e-commerce traffic con- trade lanes. including aerospace, automotive, medical, sist of newly launched high-tech devices, Lazarev says the carrier has seen “very etc and this pushes airfreight volumes to/ among them being Apple products, which high demand for our services to/from Sin- from Asia, while raising the bar of quality amount to 7% of ABC’s total cargo carried gapore, with import volumes exceeding performance for airfreight transportation ex-Asia says Lazarev. export volumes”. by implementing latest industry tech- With the volatility of the air cargo land- Part of this is due to high demand for nologies and adapting best practices and scape over the last four to five years and the carrier’s aerospace product. more highly skilled personnel.” with a dependence on one-off events, it “ABC is looking at the Asian market At the same time, adds Lazarev: “The has become quite hard to forecast where from another angle now,” he adds. growing population of middle-class con- the market is headed, says Lazarev. This means providing special logistics sumers with western-oriented appetites “However, we expect solid and stable solutions for imports and exports and for luxury goods, exotic food and other growth until the end of this year and most monitoring its cargo volumes closely in consumer goods pushes volumes of re- likely it will embrace the first months of order to guarantee that not a single busi- spective commodities and facilitates de- 2018, as there will be backlogs needed to ness opportunity is squandered. velopment of specialised logistics solu- be cleared, while the Europe-Asia trade “The growing prosperity of a middle- tions to Asia.” lane will continue its momentum and class population and the rising of western- And of course, the explosion of e-com- generate needed volumes.” oriented consumer societies in Asia, rapid merce activity in Asia, China in particular, Overall, he says that the 2018 market pace of urbanisation in particular coun- will grow at a slower pace compared to tries and high level of population digitali- the robust 2017. sation (with internet access 24/7) are the For United’s Renfer, the substantial main drivers for business growth in Asia, level of new capacity entering the market which will continue to push economic will be a key determining factor. surge in the nearest future,” he adds. “This is particularly true in China — the But the changing nature of air cargo in number of both passenger and freighter Asia has other interesting facets as well. ‘Asia is not just the factory of the world, non-stop frequencies is increasing notably. United’s Renfer notes that while the but is also a rapidly rising consumer of “It will be interesting to see how this iPhone, for instance, has had some im- goods as well’ impacts business and the market once pact on the market “unlike previous years Andrew Herdman, we pass the peak period and the demand when a product of this type would have Association of Asia Pacific Airlines slackens somewhat.” ■