Surge in air cargo demand adds heft to Asian airline earnings
singapore — A resurgence in air cargo demand is bolstering earnings at Asian airlines and is set to remain particularly robust all year, a boost for many carriers as fierce competition squeezes margins in their mainstay passenger operations.
The region’s airlines take on an outsized role in air freight, accounting for nearly 40 per cent of the global market as Asia is a major manufacturing hub. For Cathay Pacific Airways and Korean Air Lines — the world’s No.4 and 5 air cargo firms, respectively — freight represents nearly a quarter of revenue.
Carriers are benefiting from sharp drawdowns in inventories of goods like semiconductors and auto parts on the back of a strengthening global economy. That has prompted manufacturers and their customers to turn from ocean shipping to the faster, albeit more expensive, option of air to meet demand.
Global air cargo volumes surged 10.4 percent in the first half - their strongest half-year performance in seven years and nearly triple the industry’s average growth rate of 3.9 percent in past five years, data from the International Air Transport Association shows.
“[It’s] a good story,” said Cathay Pacific CFO Martin Murray in an earnings call last week. “What we’re seeing is, both into Hong Kong and ex Hong Kong, and both long haul and short haul performing well.”
The airline saw a 12 per cent rise in first-half cargo revenue and said the outlook for the rest of the year was strong — an important bright spot for the firm after it logged its worst half-loss in at least 20 years.
Cathay also noted that yields for air cargo rose for the first time since 2011 and said that it had leased two dedicated 747-8 freighters in June.
Singapore Airlines, a top 10 cargo carrier with freight accounting for 13 per cent of its revenue, was also optimistic about demand throughout 2017 as customers were already securing capacity for the year-end peak season in anticipation of major product launches, a spokesman said. —