SINGAPORE: Cargo slump big worry for Asia-Pacific airlines - Tyler

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The depressed cargo market is the major concern of the Asia-Pacific airlines as the sector makes up a significant part of their business, says IATA director general Tony Tyler.

“The biggest worry for the airlines in this region right now is probably cargo,” said Tyler, speaking on the eve of the Singapore air show. “Air cargo continues to be weak and for the big airlines it is an important component of their revenue.”

Tyler says that cargo growth has “pretty much flat-lined” for the past couple of years, which has been “a big problem” for airlines in the Asia-Pacific region.

IATA’s chief economist Brian Pearce points out that unusually, there has been “a very major divergence” in the revenue that airlines have been generating from their passenger and cargo businesses. “The passenger business has been very successful despite difficult economic conditions – air travel has continued to expand very close to its trend rate of growth over the last 20 years. But cargo has had a very difficult time.”

IATA figures show that the global air cargo business grew at just 1.4% during 2013 compared with a 5.2% rise in passenger traffic. The Asia-Pacific carriers suffered a 1% decline compared with 2012 while capacity grew by 0.8%.

Pearce says that although there have been concerns around a transport mode change for cargo from air to ocean by some traditional high value goods such as semiconductors, there is no evidence that this has been the main cause of the recent weakness in air cargo.

“The principal problem is that world trade has been weak and we’re not seeing the export and import growth that we would normally have seen as economic activity picks up,” he adds.

World trade had been growing at 6-8% before the financial crisis, but is currently around 3%.

Pearce attributes the decline to “on-shoring” of production. “Global supply chains have got shorter, partly because of an increase in protectionism since the financial crisis as governments put measures in place to encourage local sourcing, as well as some more explicit trade disputes in recent times, such as on Chinese solar panels.”

The medium term trade growth outlook is around 4.5% “which is muted, although better than the last few years”, says Pearce.

One market that appears to have been immune to the cargo slump is the Middle East. The region’s airlines enjoyed 12.8% growth last year as they benefited from improving economic conditions in Europe, solid growth in domestic economies and captured a significant share of the increasing African business.

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