IATA, as we learned in Part One of this story may have been bearish on the global economy and air freight demand out of Asia, but FlyingTypers has spoken to people amongst the region’s forwarders and airlines and they are striking a rather more optimistic tone.
      Indeed, some are predicting acceleration in demand growth in the second half of the year.      

IATA AGM In Doha

      IATA, meeting in Doha this week, has been consistently negative about air freight markets in 2014 despite its own figures showing that demand growth - especially out of Asia - has been positive.
      But many analysts are rather more upbeat, although most also highlight downside risks such as the U.S. and EU economies and the excess of belly hold capacity.

Latest Drewry Numbers

      The latest figures from Drewry suggest the tide may be turning against the bears.
      Drewry’s East-West Air Freight Price Index, a weighted average of air freight rates across 21 East-West trades, gained 1.5 points in April as it reached 104.3 points, its highest level since last year and up from 98.8 points compared to April 2013.
      Average rates reached $3.38 per kilogram in April compared to $3.34 per kilo in March and £3.12 per kilo in February.
      According to Drewry’s Sea & Air Shipper Insight, the second quarter usually heralds some recovery in seasonal demand which buoys pricing.
      “Asia-origin traffic is boosted by high-end summer fashion apparel and more high tech consumer goods launches,” said the analyst. “The fact that the trade managed to sustain pricing gains made in March into April, provides further evidence of improving market conditions.”
      But there remains risks. Any further demand falters in Europe or North America could send rates skittling and Drewry expects pricing to come under some pressure in the summer as more seasonal bellyhold capacity comes into the market.
      “Ongoing freighter capacity rationalisations, combined with stronger demand, will help support higher pricing over the medium term,” said the analyst.
      “But in the short term these effects will not be sufficient to make up for rising cargo capacity from passenger aircraft.”

Matching Demand With Service

      Mark Sutch, General Manager Cargo Sales and Marketing at Cathay Pacific, said competition from ocean and other airlines remained intense and yields are under constant pressure.
      He noted that one of the key challenges in freighter markets was finding backhaul loads into Asia. “We believe that as the Asia’s middle class continues to expand, the imbalance situation will be rectified over time,” he said.
      He added: “We continue to match capacity with demand, manage freighter frequencies and look into opening new markets. We follow demand and have launched new freighter services such as Columbus in Ohio. Our two new destinations in Mexico – Guadalajara and Mexico City – are seeing healthy loads.”

Cheetham Absolutely Solid On 2014

      “We are optimistic on H2, as are many of the forwarders that I speak to,” said John Cheetham, regional commercial manager for APAC at IAG Cargo. “Market volumes are clearly improving and, whilst one could argue that there is still excess capacity in the market, this will strengthen carriers’ performance.”
      He said product launches would boost the market in the second half of the year, but argued that growth is mainly being driven by improvements in economic conditions, which have led to an increase in consumer demand.
      “We are unlikely to see massive yield gains, other than standard seasonality, but volumes should be strong,” he added.

Business Upward Says Paul Tsui

      Paul Tsui, chairman of the Hong Kong Association of Freight Forwarding and Logistics, said there had been steady air freight growth in the first 5 months, particularly for EU and U.S.-bound cargo, and on intra-Asia lanes. “It looks like we are going to have a good 2014, and the second half should maintain the current trend,” he told FlyingTypers.
      “The main drivers are Free Trade Agreements struck by ASEAN countries, and the economic improvement of the U.S and EU, and there will be a number of projects and products rolling out soon.”

Data Rush Adds Confidence

     Their confidence is reflected in the latest forwarder confidence indexes and supported by key economic data.
      During May, Stifel’s air freight logistics confidence index increased for the first time in four months, with all lanes except U.S. to Europe showing improvement.
      Japanese exports rose in April on strong demand from China and the EU, while China's factory sector reported its best performance in five months in May, as the HSBC Flash China Manufacturing Purchasing Managers' Index (PMI) recovered to 49.7 from April's final reading of 48.1. Although a score below 50 still represents contraction, the result was better than many had expected.
      More importantly for international trade, China’s new export orders, a proxy for foreign demand, were rampant in May. The sub-index surged 3.4 points to 52.7, a level not seen in nearly three and a half years.
      “The improvement was broad-based with both new orders and new export orders back in expansionary territory,” said Qu Hongbin, chief economist for China at HSBC.
      And even though the global PMI new orders minus stock purchases series has slipped slightly over the past three months, it still indicated expansion in April. “This indicator gives a one- to three-month lead to Asian air cargo volumes with a 0.8x correlation,” according to HSBC analysts.
      The latest transport indicators report HSBC released to FlyingTypers as May ended reiterated that air cargo demand has been picking up since March, and had remained robust even through the Easter holidays, when ex-Asia volumes normally subside. “Conversations with air cargo operators and leading indicators continue to indicate modest improvements,” said HSBC.
      The strongest demand in the early part of the year was on routes to North America, according to HSBC, which said the overall market would be boosted later in the year with new product launches, most notably the iPhone 6, scheduled for release in September.
      “Also, if the U.S. West Coast port wage negotiations deteriorate into strike action, this will cause some temporary diversion from sea to air,” said HSBC.
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