Wednesday, September 11, 2013

Can recent high-tech announcements bring the airfreight market out of its slump?

Recent product announcements by Samsung and Apple suggest a potential bump in airfreight activity over the next couple of months. For a market that has suffered such a downturn in recent years, such announcements would have created a frenzy within the airfreight sector as freight forwarders and air cargo providers jockey for position to win the greatest share of the handling of the latest high tech gadgets. 

Today, while high tech goods remain an important airfreight commodity, freight forwarders are working towards a portfolio of customers that represent a wider range of industries. For many within the airfreight market, dependence on high tech goods hit companies’ financial ledgers negatively as product announcements became fewer and the economy softened.

In fact, in its recent quarterly earnings, UPS cited its dependence on the high-tech industry as a reason for declines in its airfreight revenue and volumes.

With the majority of global high-tech manufacturing performed in Asia, Asia-Pacific airlines have especially felt the declines in cargo volumes. According to the Association of Asia Pacific Airlines, member airlines reported a 2.6% decline in freight-ton-kilometers in July compared to July 2012. Year-to-date, freight-ton-kilometers are down 2.4%. True, declines in high tech cargo are perhaps not the only reason for this decline, capacity issues and fuel prices could be other reasons as well.

Among the largest of Asia-Pacific’s air cargo providers, Cathay Pacific, reported a shift in strategy earlier this year as it announced plans to target high-value goods, perishables and pharmaceuticals. Still, this was not enough for the airline as although overall profit increased for the first half of 2013, cargo revenue declined 5.2%. Demand for cargo shipments from its main market, Hong Kong, remained weak while increasing competition from Middle East carriers were a factor on European routes.

All Nippon Airways is also looking for other alternatives to boost its sagging cargo volumes. It has achieved some success in the perishables industry and in fact plans to establish next-day service to Hong Kong and Mainland China to satisfy growing demand for Japanese agricultural goods.

The recent announcements by Samsung and Apple will likely create a temporary bump in airfreight from Asia-Pacific. However, while announcements of new high-tech gadgets catches the attention of consumers and the transportation and logistics industry alike, the downturn in the global economy appears to have taught a valuable lesson to air cargo providers and freight forwarders which is the need to reduce its reliance on this industry.