Cargo market puts pressure on Asian carriers

PUBLISHED : Wednesday, 27 February, 2013, 12:00am
UPDATED : Wednesday, 27 February, 2013, 2:49am

Asian airlines face mixed fortunes this year, with continued growth in the number of passengers but pressure on cargo yields and rates despite a possible resurgence in volumes, the head of Asia's regional airline body said on Tuesday.

Andrew Herdman, the director general of the Association of Asia Pacific Airlines (AAPA), said there were signs at the end of last year that the fall in freight tonnage had bottomed out.

"But even if we see a pickup in cargo volumes, there is not going to be a sharp rebound in rates" because of overcapacity in the airfreight industry, Herdman said on the sidelines of the Greener Skies aviation conference.

Even if we see a pickup in cargo volumes, there is not going to be a sharp rebound in rates because of overcapacity in the airfreight industry

He said it was difficult to assess the outlook because data was skewed by the Lunar New Year, but he thought the increase in passengers seen last year would continue.

AAPA figures show 25 Asia-Pacific airlines carried 206.9 million passengers last year, up 7 per cent from 2011. They include association members Cathay Pacific Airways, China Airlines and Eva Airways.

Herdman said the challenge facing airlines was surplus capacity in the air cargo market, especially those flying dedicated freighters. This overcapacity was caused by falling demand due to declining world trade because of Western economic worries, a shift to ocean cargo and the delivery of new freighters.

Herdman said Asia accounted for 40 per cent of international cargo traffic, "far ahead of the US or Europe", while freight contributed 20 per cent of Asian airlines' revenues on average.

AAPA data showed Asia-Pacific carriers saw cargo volumes fall 3.4 per cent last year to the same level as in 2007. In response, airlines were "retiring freighters" and "resting freighters", Herdman said.

He added that the market for converting older passenger aircraft to freighters had "dried up" in the face of a slump in demand for aircraft and high oil prices, while the value of these older aircraft had dropped.

Cathay Pacific has parked or scrapped five of its older Boeing 747-400 freighters.

Herdman agreed with other airline executives that cargo airlines flying older fuel-guzzling freighters could pull out of the air cargo market in the face of weak demand and higher fuel and operating costs.