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Asia Pacific's air cargo under pressure from weak trade, overcapacity

ASIA Pacific carriers, especially those operating dedicated freighter fleets, are experiencing a contraction in air cargo volumes as trade weakens, reversing the modest growth in air cargo seen at the beginning of this year.

"Asia's airlines saw cargo growth last year that was long overdue and we got off to a bright start at the beginning of this year, but much of that was due to the US west coast port disruptions," director general of the Association of Asia Pacific Airlines, Andrew Herdman, told reporters at the annual AAPA Assembly of Presidents in Bali, Indonesia.

"As we have gone through the year, the year-over-year monthly comparisons have tapered off to the point where cargo growth is 2.6 per cent for the first nine months," Mr Herdman was quoted as saying in a report by IHS media.

Cathay Pacific's October cargo figures show an increase in volumes of 4.6 per cent compared to the same month last year. However, the year-to-date cargo tonnage growth of 5.5 per cent was overtaken by a 6.5 per cent increase in capacity.

"We moved to a full freighter schedule as traffic on the trans-Pacific routes increased and demand to and from India continued to strengthen," said general manager Cargo Sales and Marketing, Mark Sutch. "Our teams worked hard to push up the load factor for both freighters and passenger aircraft belly space; however, overcapacity in the market continued to put pressure on yield."

Mr Sutch said he expected the year's cargo peak to run until the end of November.

Yet a good fourth quarter will not be enough to redeem the cargo business that has become a drag on performance as a surplus of freighter capacity puts downward pressure on rates and the profitability of freighter operations.

"The slow growth in the cargo business means the oversupply of freighter capacity, whether flying or stored, is still hanging over the sector, and because the belly capacity keeps growing at 5-7 per cent, it is mopping up a bigger share of an overall cargo market that is slow growing or stagnant," Mr Herdman said.

This was prompting some operators to shrink their freighter fleets to reduce their exposure to the cargo business.

He said the outlook for cargo remained relatively good, although the 50:50 belly-freighter mix might shift to 55:45, but that still meant a lot of freighters will be needed in the future.