The traditionally strong Asian airfreight export market is
in a state of change. Through the first eleven months of 2011, the Association
of Asia Pacific Airlines (AAPA) reported a 4.8% decline in cargo and for all of
2011, Hong Kong Air Cargo Terminals (Hactl) reported a 5.2% decline.
The declines in Asian exports have been noted by air freight
providers. For example, during third
quarter 2011, UPS noted this trend too late and as a result suffered
single-digit declines. This led to the company cutting capacity by 10%. However,
after determining this was just an isolated case, the company announced it
would increase capacity on flights between Asia and North America during fourth
quarter. FedEx, in their recent earnings report (reported Dec. 15), noted they
were adjusting the company’s network, particularly in Asia, “as recent
destocking trends have impacted demand for our FedEx Express services”,
according to CFO, Alan Graf.
Other providers, such as Air France-KLM reduced capacity out
of the Asian market and are reportedly deciding whether to take more out.
Lufthansa Cargo has also hinted that it may reduce capacity.
The anticipated lead up to the Christmas holidays appears to
not have been as strong for airfreight providers as anticipated. This, as well
as an overall disappointing 2011, resulted in several providers suspending
operations such as Cargoitalia, Jade Cargo and Air India Cargo.
Also, reports that a lead up to the Chinese New Year failed
to materialize. This lack of demand does not bode well for the beginning of a
new year. Particularly as many
forecasters expect a continued decline in airfreight demand for the year. Still, it is quite possible especially with
early restocking noted in the US prior to the Christmas holiday, that the need
to restock will pick up in late first quarter as Asian manufacturing resumes
operations after the Chinese New Year holiday closures.
Due to Asian declines in exports, the need to adjust
capacity from Asia is needed. It will
remain to be seen if UPS was successful with additional capacity during the
last quarter of 2011 when the company reports its year-end earnings this
week.
However, 2012 should not be all gloom and doom for many
providers if they do their homework. To remain viable and profitable in 2012,
airfreight providers will need to remain agile in their ability to not only
adjust capacity as needed but also to
shift capacity to those tradelanes that have need for such.
