Asian carriers drive strong worldwide air cargo gains

The International Air Transport Association released its air freight market analysis for February 2015, showing an overall 11.7% year-over-year increase in worldwide cargo traffic. The growth was driven by a 22.0% increase in international traffic reported by carriers from the Asia-Pacific region, which underpinned an overall 12.7% growth in international traffic worldwide. Domestic traffic in February was up 20.8% for carriers in the Asia-Pacific, and 5.5% worldwide.

As we do every year at this time, we point out that the variable timing of the Lunar New Year holiday in Asia makes year-over-year comparisons of both January and February data unreliable in themselves, and it is only when we look at the combined January/February results that we can get a clear view of any underlying trends. However, in 2015, even the combined two-month data is suspect because the labor dispute at the US West Coast ocean ports, and a recall of millions of defective automobiles in the US, forced the shift of an enormous amount of traffic from ocean to air on the trans-Pacific lane in February.

On a reported basis, worldwide air cargo traffic was up 7.5% for the first two months of 2015, with international traffic up 8.2% and domestic traffic up 2.9%. However, as is obvious from the chart above, this growth was disproportionately driven by the extremely strong gains reported in February by carriers based in the Asia-Pacific and North America. (Yes, carriers based in the Middle East also reported strong growth, but carriers based in the Middle East always report strong growth.)

Two weeks ago we took a closer look at the February results of some of the major Asian carriers, and when we saw the staggering gains reported by those with a strong focus on the trans-Pacific focus we concluded that the impact of the US ocean port congestion was much bigger than most observers had realized. You can see our full analysis here, but with carriers like Cathay and China Airlines reporting year-over-year gains of almost 40%, it was obvious that there was much more involved than just the timing of the New Year holiday.

IATA has come to the same conclusion, reporting that while the timing of the holiday did provide a strong boost in February, the spike in trans-Pacific traffic was not due to this alone. “The implications of on-going congestion at major US sea ports has meant that Japanese car manufacturers have turned to air transport for shipment of parts across the Pacific, after a recall of millions of defective vehicles in the US. Airlines in Japan have seen a strong rise in FTKs in February compared to a year ago, we believe partly because the auto manufacturers have opted for air freight in order to avoid sea port delays in the US. The port congestion problem has also benefitted North American carriers, which experienced an 8.7% rise in FTKs in February year-on-year.”

Of course, it was not just the automotive industry that had to shift from ocean to air. With multi-week backups at the US West Coast ports, anyone who needed to move goods from Asia to the US or from the US to Asia had no choice but to open their checkbook and shift to air.

However, with a tentative settlement to the labor dispute now in place, the port backlogs are shrinking, and the benefit to the air mode will disappear. So what, if anything, can be said about the underlying trends that drive air freight demand?

On this subject, we agree with IATA’s conclusion that “fundamental drivers support moderate acceleration in the growth trend.” That is, if there had been no Lunar New Year holiday, no port congestion, and no massive automobile recall, then air cargo traffic worldwide would probably have continued to show the 4% to 5% growth we saw in the latter part of 2014.

Which, in our view, is pretty good news.

Find opportunities in the Asia-Pacific region, the world’s most dynamic air cargo market, at Cargo Facts Asia, April 21-22 in Hong Kong. Get more information here.