Softer demand, coupled with an increase in capacity between China and North America, has affected yields, but still the trans-Pacific sector remains healthier than the Asia-Europe market, said Mark Sutch, general manager of cargo sales and marketing at Hong Kong-based Cathay Pacific Airways. He added that the slowdown in traffic from Asia to Europe has been exacerbated by rising capacity in that arena, mostly in the bellies of widebody passenger aircraft.
“In past years, we have seen an increase in widebody passenger aircraft replacing traditional freighters, thus reducing main-deck but increasing lower-deck capacity,” agreed Li Wenjun, head and senior vice president of air freight at DHL Global Forwarding Asia Pacific.
A bigger concern, though, is the growing popularity of rail service linking Asia with Europe. In June, DHL Global Forwarding launched a twice-weekly rail link from Zhengzhou to Germany, via Poland. The 17-day service is the company’s third regular rail connection between China and Europe. “Last year we saw a modal shift of shipments from air to rail services for China to Europe. We anticipate this trend to continue as the China-Europe rail infrastructure further stabilizes,” Li said.
With the case for flying freighters from Asia to Europe undermined by both growing belly capacity and competition from the new rail services, Asian airlines have increasingly turned to round-the-world freighter operations that return to Asia from North America via Europe, tapping into eastbound demand from Europe, while avoiding the scramble to fill cargo planes headed west for Europe.
But what of the future? While DHL’s Li agreed that trans-Pacific demand has softened lately, he said he expects cargo volume “to pick up again for the traditional peak season in August or September.” He added that, “while we have seen a modal shift from air- to oceanfreight in the past years, industries such as e-commerce are bringing an increase in airfreight shipments, which is further spiked by products like perishables and newly launched products from technology companies.”
Other industry executives, on both sides of the Pacific, share his expectation that the airfreight market will strengthen for the peak season. Jan Krems, president of cargo at United Airlines, remarked that some key customers have expressed confidence about the peak, and Titus Diu, COO of China Cargo Airlines, expects new product launches in the third quarter to boost airfreight demand.
At this point, traffic is not rising as fast as capacity, but many carriers are optimistic enough to feel the need to ramp up capacity for the upcoming peak season. Hong Kong-based Cathay Pacific, for example, has increased its North American freighter services over the past year, and Mark Sutch says the carrier is now looking at further expansion.
Sutch said he sees room for growth in Mexico, a market that Cathay has been serving with cargo aircraft since September 2013 with steadily rising capacity. So far, all its Mexico flights have been extensions of runs to Los Angeles, but now management is considering cutting the California stop later in the year on possibly three of the five weekly frequencies to Guadalajara and Mexico City. “Demand ex-Mexico is also improving. It seems, with time, people understand they don’t need to truck to Los Angeles to get cargo to Asia,” Sutch said. “We are committed to Mexico, and when resources permit, we will get to six [flights] per week.” Cathay currently runs 37 freighter flights a week across the Pacific and is looking to increase this to 43 in the peak season, according to Sutch.
Cathay is not the only airline that is ramping up trans-Pacific freighter activities. Air China Cargo also is preparing to expand its North American footprint. In September, the Chinese carrier (in which Cathay has a 49 percent stake) intends to launch freighter flights from its Shanghai base to Edmonton and Dallas/Fort Worth, returning the same way. It will fly 777Fs three times a week on the new route, according to COO Titus Diu.
Cargolux, which launched twice-weekly freighter flights from Zhengzhou to Chicago in May, intends to double the frequency in the sector. And Shawn McWhorter, president for the Americas at Nippon Cargo Airlines, said that the Japanese carrier for Peak 2015 will operate at the same frequency as it did during the 2014 peak season, which he described as good.
Despite all the planned increase in transpacific capacity, Li said DHL Global Forwarding still sees a need to secure lift for the peak season. “We will continue to work with our carrier partners on long-term block-space agreements and secure selective charters for our strategic customers in support of their peak season spike.”