Gadgets fly as pickup tonic for freighters

Apple's new iPhones and Samsung Electronics' Galaxy Gear watches are the gadgets that Asian freight airlines have been waiting for.

Asian carriers, suffering from a six-month traffic slump, may be able to break the losing streak with the help of new devices. Samsung just unveiled its Galaxy Gear and Note 3 smartphone and Apple plans to show its new iPhones next week, meaning a rush to deliver product from factories in Asia before the Christmas shopping season.

As economic growth cools on the mainland, cargo carriers will need US and European consumers to scoop up the new models because transporting electronics is their biggest business. Six of the world's 10 largest freight airlines are in Asia, so a revival would ease earnings pressure at companies such as Korean Air Lines, which moves Samsung's phones, and Cathay Pacific Airways.

"The market needs revolutionary products to generate constant demand," said Park Eun-kyung, a Samsung Securities analyst. "Whenever a new device is introduced, there's always an increase in shipments for about 15 days to a month."

Asian cargo shipments have dropped every month since February and declined 1.4 per cent in July, according to the International Air Transport Association. Global shipments rose 1.2 per cent, helped by a 14 per cent surge in the Middle East.

Korean Air, Asia's biggest freight carrier, moved 2.1 per cent less cargo in the second quarter. Cathay, the region's No2, posted six consecutive months of declines to July.

Freight carriers such as United Parcel Service and DHL Worldwide Express get traffic going by moving finished goods and the components that go into making them.

"We want Apple and Samsung to introduce new products more frequently," said Zhu Zhiyong, general manager of sales and marketing at Yangtze River Express Airlines. The company has moved every major iPhone and iPad model from Chengdu and Chongqing to the US using its Boeing 747 jumbos. "New products will give carriers bargaining power on pricing, especially in September, right before the peak Christmas season," Zhu said.

With components such as memory chips to cameras coming from different locations, air delivery is essential to cut lags. The iPhone, designed in California, has parts made in South Korea by Samsung, and in Japan by Sony. They all need to reach assembly lines in China for production to proceed smoothly.

That logistics chain is key to generating traffic for cargo airlines. "Manufacturers require just-in-time delivery, so they rely on air freighters, and don't mind paying more for moving these goods by quality airlines," said Eric Lin, a Hong Kong-based analyst at UBS Securities Asia.

Cathay last month reported its smallest profit in at least 15 years as cargo revenue dropped. Hi-tech product shipments account for more than half its freight volume, said Kelvin Lau, an analyst at Daiwa Securities.

Cathay spokeswoman Elin Wong said: "We definitely welcome these new product launches as they present opportunities to air cargo."

One downside, however, for the airlines is that the new devices are getting smaller.

"That's good for consumers, but bad news for air cargo companies as rates are often determined by weight and size," said Um Kyung-a, an analyst at Shinyoung Securities.