Macroeconomic weaknesses impact A-Pac volumes ahead of peak season

Declines seen in Asia-Pacific volumes ahead of peak season are due to economic weaknesses, COVID-19-related disruptions and low manufacturing levels, stakeholders say. Asia-Pacific volumes have been declining since March , despite recovering passenger traffic, with an 11.6% year-over-year decline in July traffic , according to the most recent data from the Association of Asia Pacific Airlines (AAPA). Roughly 5,493 tonnes of air cargo were transported in July, while capacity was relatively flat YoY. The AAPA further noted that ongoing challenges, including a distinct slowdown in global economic growth, will continue to affect volumes. Hong Kong-based Cathay Pacific Cargo operated a full freighter schedule in August after months of rebuilding its network and schedule but transported roughly 104,851 tonnes of cargo in August, down 16% YoY and a 35% decrease compared with the same month in 2019, according to a Sept. 16 release. [caption id="attachment_57131787" align="alignright" width="555"] HKG Cargo Terminal. Photo/Cathay Pacific Cargo[/caption] Available cargo tonne kilometers, meanwhile, were down 11% YoY. From January through August, tonnage dropped 8% YoY, according to the release. Further, overall flight capacity was down 11% YoY, which the carrier attributed to having “operated a significant number of long-haul, cargo-only passenger flights at that time ,” according to the release. Cathay Pacific operated 59% of its pre-pandemic cargo flight capacity during August, although demand was flat throughout the summer months. Maximizing capacity, cutting costs Regardless of ongoing slack demand in Asia , as well as a lull in manufacturing, Cathay Pacific continues to prepare for peak season. “Regarding cargo, whilst the anti-pandemic measures in the Chinese Mainland may affect supply chains, it has been encouraging to see New Product Introduction (NPI) shipments begin in September, which bodes well for the expected solid peak season,” Ronald Lam, chief customer and commercial officer at Cathay Pacific, said in the release. “As a result, we will continue to maximize freighter capacity, supported by the increased passenger services and regional cargo-only passenger flights.” Meanwhile express operator FedEx announced a reduction in flight frequencies and the temporary grounding of some of its aircraft in an attempt to cut up to $1.7 billion in costs following a weak preliminary Q1 earnings report due to challenges in the Asia-Pacific region, according to FedEx’s Sept. 22 Q1 earnings report. FedEx declined to comment on which frequencies will be impacted or when the capacity slashes would take effect. “First quarter results were adversely impacted by global volume softness that accelerated in the final weeks of the quarter,” according to a Sept. 15 release. “FedEx Express results were particularly impacted by macroeconomic weakness in Asia and service challenges in Europe .” FedEx Express reported a 69% decline in operating income due to an 11% year-over-year drop in global package and freight volume, according to the earnings report. See also : Ex-Asia capacity softens in September Trans-Pacific demand at a glance Indeed, Asian export markets to North America are facing a lull in demand, according to a September air market update from forwarder Crane Worldwide Logistics. Routes to North America with major freighter services include Shanghai (PVG)-Los Angeles (LAX) or Chicago (ORD) trade lanes, while other U.S. airports are via indirect flights. Routes from Asia to Europe, the Middle East and Africa are also seeing low demand, according to the report. Although Hong Kong export demand has remained slow since June, carriers expect an uptick in volumes in the last week of September and after the national holiday on Oct. 7. Further, trans-Pacific volumes have been declining since the start of 2022, with early September rates 50% lower YoY, according to Freightos’ Sept. 22 update. “Air cargo rates remain about double the norm, and the latest data (from July) saw volumes still 10% higher than pre-pandemic levels , suggesting that — like in ocean — volumes and rates are coming down from last year’s extremes, but for now, remain elevated,” according to the update. [caption id="attachment_57132218" align="aligncenter" width="959"] Graph: Freightos Air Index[/caption] Peak season outlooks Peak season anticipations have differed across stakeholders , with some expecting a muted peak season this year, citing low demand, supply chain slowdowns and labor shortages as key factors. Meanwhile others say that there won’t be a peak season at all, including DSV Senior Director of Air and Sea Thomas Christensen, who spoke during a Sept. 13 Air Cargo World webinar. With airlines adding extra capacity, including bellyhold space, without market demand, a slight uptick in volumes could take the place of a peak season. If there is a peak season, it will likely be driven by e-commerce shipments to and from Asian markets, Scan Global Logistics noted during ACW’s webinar . As express volumes continue to grow, and express carriers like UPS, SF Express and DHL begin expansion, the Asia Pacific region could see this year’s largest peak. However, some stakeholders maintain an optimistic outlook . For instance, C.H. Robinson noted in its Sept. 15 airfreight market update that an uptick in demand in Q3 from the current “slack” situation could be expected. “Stable rates are expected to be maintained with no capacity issues in general, barring any major developments from the market,” according to the report. Despite divergent expectations for peak season or lack thereof, volumes, capacity and freight spot rates in August outperformed June and July, according to the latest report from CLIVE Data Services . A-Pac hardships The Asia-Pacific region — China especially — has faced its share of challenges this year. In fact, renewed partial COVID-19-related lockdowns and restrictions were recently implemented in Shenzhen, Guangzhou and Dalian, according to C.H. Robinson. Further, the Chinese government suspended U.S. flights in September, resulting in the U.S. changing its own flight schedules to various Chinese cities. As of Sept. 22, there are roughly 605 canceled flights between Sept. 21 and Sept. 24 at Shenzhen Baoan International Airport (SZX), 542 canceled flights at Guangzhou Baiyun international Airport (CAN) and 364 canceled flights at Dalian Zhoushuizi International Airport (DLC) during the same period, according to flight tracking software. Shanghai also faced severe restrictions earlier this year to curb COVID-19 outbreaks in the city, leading to major disruptions in airfreight operations at both Shanghai Pudong International Airport (PVG) and Shanghai Hongqiao International Airport (SHA). These restrictions were lifted in June . China generated one-quarter of the world’s trade growth from 2016 to 2021, according to DHL’s 2022 Trade Growth Atlas published Sept. 15. Although China will still hold most of the trade growth from 2021 to 2026, its global share will halve to 13%. Trade hubs in Southeast and South Asia as well as Sub-Saharan Africa are also poised for growth.

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