Air cargo operators are taking a cautious approach to the coming year with the recurring issue of over-capacity set to remain in a mixed economic environment.

“The outlook for air cargo markets in 2016 will depend on a number of factors, including the way in which the global economy adjusts to slower rates of growth in key emerging markets, and the effects of ongoing currency volatility on patterns of international trade,” Andrew Herdman, director general of the Association of Asia Pacific Airlines told Asia Cargo News.

Air cargo operators will be carefully reviewing their capacity and network development plans while closely monitoring further market developments, he went on to say.  Longer-term growing consumer demand in major emerging markets creates an optimistic future for the sector, he added.

Much of this has been corroborated by the airlines themselves.

“There is no doubt the global macroeconomic outlook remains mixed, however we are convinced that opportunities will arise for high-quality air-freight solutions. The key will be to remain flexible with our network and continue to offer high levels of quality and service,” Frank Naeve, Lufthansa Cargo vice president Asia-Pacific, told Asia Cargo News.

A slightly more qualified version of this comes from some of the other companies involved in the sector.

“Going into 2016, air cargo volumes are likely to remain flat, given the slowdown in major economies such as Europe, and the weaker-than-expected recovery of the US economy. Nevertheless, we remain cautiously optimistic that air cargo volumes will recover by the end of 2016.” Phau Hui Hoon, senior manager, cargo and logistics development, Changi Airport Group, told Asia Cargo News.

Changi in many ways shows what the future holds with new facilities to support the growing demand for express cargo and e-commerce in the region, as the new DHL South Asia Hub, with a total investment of S$140 million (US$98 million), will be completed in 2016.

“The new facility would increase DHL’s throughput by three times and processing speed by six times, and further anchors Changi Airport’s position as a key cargo and logistics hub in Asia,” Hoon added.

Similarly, SATS is investing in an e-commerce hub at Changi Airport to tap the region’s booming e-commerce market, with SingPost as its anchor customer. This project is expected to be completed in December 2016.

“SATS will be the first ground handler in the world to own such an airside facility,” Hoon said.

Having a post office as one of the first organizations in the world to run an e-commerce hub is one of the two trends air cargo will deal with in the coming year, says Olivier Bijaoui, president, CEO and executive chairman of Worldwide Flight Services.

Pointing out the importance of e-commerce in the market, Bijaoui linked it to the increased role of post offices who he said were giving a lot more support airside. “That’s helping the volume for sure,” he told Asia Cargo News.

This he attributed to China’s middle class, whose willingness to spend is what people like to hear. “There is a growth of the middle class so exports to China are not bad at all,” he said.

Once again there is corroboration for this, but one which also hints at the potential waiting to be tapped.

The Chinese cargo market remained positive posting a 1.1% growth for the first nine months of 2015. Changi Airport’s Hoon attributed this to the increase of imports (into Singapore) and transhipments, which outweighed a decline in exports (to China).

But measured by cargo commodities, there was strong growth of temperature-sensitive cargo segments, such as pharmaceuticals and perishables, which have posted increases of 145% and 14% year-on-year respectively for the first nine months of 2015, Hoon said. (Pharmaceuticals are the sort of air cargo commodity middle class consumers can – and do – buy because they have to, while perishables are the consumer goods they buy because they like to. Whatever its form, it shows the potential of the market.)

All that said, Bijaoui does not expect e-commerce to give air cargo a great boost, at least not in the near term future. His view is the market this coming year will be “flat.” Volumes will remain the same, but the mix will be different, he said.

The second trend he flagged is consolidation, especially among ground-handling agents. WFS is very much a player in this process, but Bijaoui’s basic view is the process is industry-wide and ongoing. “There’s still room for this consolidation, and it is substantial,” he said.

Source: By Michael Mackey