China slowdown eclipses Japan effect

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A decrease in Chinese export traffic is of more concern for freight operators than fallout from the Japanese earthquake

Considering that it hit one of the world's largest industrial economies, the impact of the earthquake and tsunami in Japan in March on the air freight business seems relatively muted.

Although auto-makers as far afield as Turkey, Poland, the Philippines and the USA closed factories or went on short-time working in April for lack of Japanese parts, the airlines that routinely transport such parts are not reporting any major drop in traffic.

Most have seen a fall in Japanese exports, but an increase in imports as manufacturers there turned to other global sources for parts they were unable to get in their domestic market. For example, Dave Brooks, president cargo for American Airlines, says it has seen increased shipment of auto-parts out of South America into Japan.

One reason why the Japan effect is less visible may be because there is a bigger concern for the world's airlines - a pronounced slowdown of export traffic out of China. All key operators have said this has been noticeable in recent months, with some saying it started last year.

Why the slowdown is occurring is hard to define, but there is speculation that as well as weak demand in Europe and the USA, rising Chinese labour costs or the stronger yuan might be factors.

Given the importance of Chinese exports as an engine of air freight growth, the slowdown is a worry, but carriers are putting a positive gloss on it. Lufthansa Cargo chairman Karl Ulrich Garnadt has characterised it as a return to normal growth rates after a booming 2010.

Frank Naeve, chief executive of Shenzhen-based all-cargo carrier Jade Cargo International, sees it as a sign the market is maturing. "In the past, all you had to do was fly to China to make money. Now we will see a more normal competitive environment," he said.

The bad news is that the 2010 boom led to too much freighter capacity being added to the China market, and that could be made worse by the Chinese government's drive to boost the market share of its own national carriers.

The good news is that most carriers report that cargo flows into China continue to grow as domestic demand there remains robust, reducing imbalances on these routes. Jade reports that the revenue imbalance is now down from 1:6 in the past to as little as 1:2. Garnadt reports that for the first time Lufthansa even has some China flights that are fuller eastbound than westbound.

Read more about the recent ups and downs for airfreight at: flightglobal.com/CargoBarometer