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   Vol. 16 No. 83
Monday October 16, 2017
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Peak Peek Into Octember
Peak Peek Into Octember


When Apple unveiled its new iPhone X among a bevy of launches in September, it was easy to see air freight’s Indian summer through the prism of the electronic behemoth’s pre-launch shipments. Yet that was not the only factor boosting demand on key lanes.


Will Bridget Fidget?

     Take fidget spinners, for example.
     The kids craze has taken the world by storm this year. By May, all 20 of the top-selling toys on Amazon were fidget spinners or fidget cubes. One estimate suggests that during the first six months of the year, 50m units of the product were sold – mostly to consumers in Europe and the U.S.


Lucas KuehnerFocus Lucas Keuhner

     Lucas Kuehner, Panalpina’s global head of air freight, told FlyingTypers that new products had contributed to keeping air freight markets buoyant in 2017. But he insisted demand was strong across most verticals.
     “We are not engaged with Apple, but what we see is strong demand for electronics, industrial consumables, auto and manufacturing, telecoms and, especially on the Transpac, a lot of consumer goods,” he said. “There is growth across the board. There’s no single market that’s not growing.


Spins A Tale

     “Earlier in the summer, we had the opportunity to fly these spinners, for example. This is dense cargo when shipped in bulk. When it’s on the shelf and it’s hot it has to go by air. This is an example of what leads to sudden capacity crunches - two charters flown with this stuff eats into the market.”


No Slow Down In Sight

     Kuehner said demand had remained strong on major lanes outbound-Asia through Q3, especially on the Transpacific trade. “Demand from Asia has never really subsided since Q4 2016,” he added. “The Far East to Europe lane dropped a little in Q3 compared to Q1 this year and Q4 2016, but not to the levels of previous years – in fact it wasn’t really even a dip, it just wasn’t as strong as the Transpacific. And recently we have seen a bit of an uptick.”


Boosting Markets Into Octember

     “Export lanes out of Asia are not the only ones enjoying heavy traffic,” Kuehner said “there was currently significant volumes flowing from Europe in “all directions”, while the Transatlantic and Latin American markets were also performing strongly.”
     At the end of September there was an expected boost to markets. “It’s the end of the quarter so that drives some additional volume and, with the Golden Week holidays and factories closed at the start of October,” he explained. “expected shipments right up to the start of the holidays further amplified demand.”
     Indeed, Kuehner sees no sign of demand slowing over the rest of the year. “As soon as business resumed post Golden Week we headed into the peak season,” he said. “I don’t expect another dip in demand out of Asia this year. We’re looking at a long and deep peak season this year, similar to 2016.
     “Carriers are also managing capacity so we are expecting a crunch. Rates will likely spike in parallel to this high Q4 demand leading into Q1 next year.”
     However, he cautioned that year-on-year volumes would probably not be as starkly higher in Q4 as during much of 2017 simply because Q4 2016 was so spritely.
     “Relative growth rate might not be as huge in Q4, because it’s against a much higher base, so it will be down from the 10% year-on-year growth we’ve seen for much of this year,” he added.


Grab Capacity Not Just Blowing Smoke

     Panalpina is warning customers they should secure capacity now to avoid higher rates later in the year, albeit Keuhner added the proviso that, this being the air cargo market, there were always downside risks.
     “What I explain to customers is this is a prediction, but all the indicators I have including many, many conversations with customers and carriers, is that with more product launches to come, which also boosts component traffic, plus e-commerce performing strongly, it all points to a strong peak,” he said.
     “But it’s also unpredictable. We are working intensively with customers so they can put aside capacity with carriers so they have pre-procured capacity on different lanes.”


Busting Out Charters Everywhere

     Panalpina has already contracted more than 100 ad hoc full charter aircraft outbound from Asia ahead of Q4. “We are prepared, but we will also buy capacity on the open spot market,” he added. “We’re doing it early as rates might go to crazy levels like we saw last year.”


Can It Get Worse?

     He also said there were already shortages of capacity on key lanes such as HKIA to LA. “That’s one where I expect it to get worse,” he said. “As soon as we see the crunch starting, we will implement our peak season plan arranged with customers and carriers.
     “Carriers are trying to drive the rates up and the market is trying to establish new price points, which is fair because fuel is higher than last year.
     “The consequence for the client is that they need to take this into consideration and shift their focus in terms of how they procure capacity and the key to this is early engagement. They need to secure capacity first and foremost so they can get products on shelves on time.”
SkyKing

Publisher-Geoffrey Arend • Managing Editor-Flossie Arend •
Film Editor-Ralph Arend • Special Assignments-Sabiha Arend, Emily Arend • Advertising Sales-Judy Miller

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