Overheard at Cargo Facts Asia Part I: It’s Safe to be Bullish

Delegates sitting elbow-to-elbow, eagerly listening to the opening plenary session at Cargo Facts Asia 2018.

SHANGHAI – A record crowd of senior air cargo executives gathered for Cargo Facts Asia 2018, held at the Mandarin Oriental Pudong. Once again, the crowd was enlightened with presentations and discussions from some of air cargo’s best and brightest while enjoying focused networking opportunities with the people shaping the air freight industry.

The opening plenary session was nearly overflowing – an excellent indicator of optimist sentiments and the region’s appeal to a booming industry. It’s no surprise delegates were so eager for an industry barometer – after all, IATA reported global air cargo demand up 9% in 2017, the highest growth since 2010, and the third highest since 2000.

Of course, one of the joys of Cargo Facts events is listening closely, not just to what is said on the stage, but also during the coffee breaks, at the cocktail receptions, and in the hallways. We like to summarize those insights every year under the title: “Overheard at Cargo Facts Asia.” And today we start with Part I of our two-part coverage of this year’s event. Join us tomorrow for an overview of developments pertaining to new-build freighters and conversions.  

Zhang Dezhi, vice president, cargo, China Southern Airlines on an air freight trends panel at Cargo Facts Asia 2018.

Is air freight’s growth sustainable? After the outstanding year-over-year growth throughout 2017, comparisons are more difficult in 2018, but Neel Jones Shah, senior vice president, global head of airfreight, Flexport, said on an air freight trends panel that it is safe to be bullish on air freight in 2018, with a couple of caveats. The protectionist rhetoric surrounding Brexit and United States President Donald Trump’s proposal to increase tariffs on goods imported from China is “not helpful,” Shah said, before encouraging a “return to the diplomacy of the past.” Zhang Dezhi, vice president, cargo, China Southern Airlines, on the other hand, said on the same panel that growing express and e-commerce markets, and the subsequent growing volumes in air freight. could counteract the effects of even a full-blown trade war between the US and China.

Long-term fleet planning a challenge for China’s emerging express carriers. Although rarely publicly announced, and certainly subject to change, most freighter operators have at least a rough idea about upcoming changes to their fleets. This isn’t necessarily the case in China. “We don’t have the luxury of doing a five-year plan,” said  Chung Mak, vice commanding officer, Aerotropolis project and aviation advisor to president, SF Express. Nothing the growth of the market, and SF Airlines’ rapidly-growing fleet, Mak said express carriers often have few options when it comes to timing and fleet type. In some cases, that means paying a premium to add capacity, or taking delivery of freighters before they are needed.

Eddy Chan, head of China, senior vice president, FedEx Express.

E-commerce own-operated air freight isn’t a threat to carriers. On a panel discussion about Asia’s growing express networks, Eddy Chan, head of China, senior vice president, FedEx Express, said rather than competing with carriers, “the e-platforms compete with each other.” FedEx and other integrators cashing in on lucrative e-commerce business offer different types of transportation solutions than those being considered by the large e-commerce operators. Regardless of whether those own-operated networks are built out, Chan encouraged airlines to focus less on whether or not the Amazons of the world will build their own networks, but to “also look at e-commerce SMEs as a source of business.”

Representatives from the e-commerce platforms are also skeptical that own-operated air freight networks will replace or seriously threaten current offerings. Stephen Leung, senior vice president, logistics, Lazada Crossborder, reaffirmed e-commerce’s reliance on air cargo operators during a presentation on e-commerce. According to Leung, Lazada currently does not have plans to own or operate its own aircraft, and prefers to work with airlines for its air freight logistics needs. It remains unclear, the extent to which low-cost passenger carriers that have dense networks across Southeast Asia,  such as Lion Air, will be able to meet this demand for air lift.  

High-speed rail in China is emerging as a domestic competitor with air freight. Even without e-commerce operators building their own networks, air freight within China faces pressure. This is partially thanks to infrastructure constraints at airports, which are mostly built with passengers in mind, said Chung Mak, vice commanding officer, Aerotropolis project and aviation advisor to president, SF Express. Meanwhile, China’s strong high-speed rail network offers a multi-modal option that could become very attractive for domestic deliveries, particularly with rising fuel costs and freight rates for air cargo. During a panel discussion on Asia’s express networks, David Su, chairman, YTO Cargo Airlines Co., also agreed that high-speed rail is likely to be a big domestic competitor for express deliveries within 6-10 years, “but the international market is still very promising for air.”

Join us tomorrow for part II of “Overheard at Cargo Facts Asia”, where we’ll take a look at some of the exciting developments pertaining to new-build freighters and conversions.  

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