Increasing intra-Asia trade is not only limited to the developments in China alone. The general rise of domestic demand in Asia, including India, Indonesia and Vietnam, is also spurring air cargo growth in the region. Surya Kannoth
“The increasing trade between Asian economies and continued growth in Chinese demand for consumer goods mean that prospects for further growth in intra-Asian trade remain positive. Given the positive dynamics in the region, intra-Asian trades are likely to continue to play a key role in global deployment trends,” said a recent report by London-based shipbroker Clarkson. Donning the leading role in intra-Asia trade, China is now increasingly ‘near-sourcing’ from the region in terms of raw materials, components and finished products. Traditionally, China has been a key manufacturing hub for a variety of products: garments, high tech products, and a full range of other consumer products. However, driven by lower land and labour costs in neighbouring coutries, many of the lower value components and products have been outsourced from China to Vietnam or the Philippines for final assembly in China. All of these have contributed to a fast growth in air freight along the intra-Asia route. Economic corridors along the route connecting ASEAN and into China are created with manufacturing clusters being established in Vietnam and more recently in Cambodia. The significant growth from cross-border trade with emerging ASEAN markets has given freight service providers reason to be excited about their China-ASEAN offerings, which have recorded steady growth. Over the years, Asia has witnessed the emergence of many production hubs. It is widely expected that Asia will continue to position itself as a key manufacturing hub for commodities needing air freight, especially fashion and high tech products. Electronics and machinery have been driving the air cargo demand in Asia. In addition, there’s an increasing demand for the transport of special cargo like pharmaceuticals. That will sustain intra-Asia air freight growth. “Asia remains a dominant contributor to the air cargo market and intra-Asia growth continues to provide significant new flows within Asia, which is supported by the growth in belly capacity in Asia,” said Vikram Singh, managing director-Middle East & Asia Pacific, Air Logistics Group. Seconding Singh’s opinion on the growth of the intra-Asia trade lane, Lutz Grzegorz, vice president, Shanghai Pudong International Airport Cargo Terminal (PACTL) says, “Asia’s air cargo industry sees growth in the domestic markets. Especially the air cargo industry in mainland China continued to increasingly show a development above average during the last couple of years.” In the recent years, other Asian locations have also come forth such as Laos, Bangladesh, Vietnam etc. Vietnam, in particular, has witnessed significant growth in air freight with materials flowing in for manufacturing, taking advantage of the cheap production cost base there, and finished manufactured products coming out, going via other more significant air cargo hub like Hong Kong for export. Explaining Hong Kong’s positioning in the Asian air freight market, Lilian Chan executive director of Hong Kong Air Cargo Terminals (HACTL) says, “In the case of Hong Kong, we have the advantage of being a major transshipment hub connecting China and the rest of the world over the past decades. A lot of the intra-Asia cargo assembled in Hong Kong for consolidation, then gets flown to major overseas export markets via big freighters of many major Asia Pacific carriers that operate from Hong Kong.” The low tax regime, streamlined operations, proven efficiency and highly supportive Customs officials all facilitate the growth of air cargo, and are contributing factors ensuring Hong Kong will continue to emerge in terms of continued air cargo growth, Chan adds. Cargo outlook Even as the overall global outlook for cargo remains grim, volumes on the intra-Asia route are gaining ground. “The outlook for cargo is still challenging given structural over-supply in the market place, weak demand and high fuel prices. Overall volumes are slightly improving; however yields remain under pressure due to intense competition, both from other air-freight carriers and sea-freight. It is hoped that this year will see a longer peak season in Q4 as global demand continues to recover,” deems Ivan Chu of Hong-Kong based airline Cathay Pacific. On the GSSA side of the business, Air Logistics Group’s Vikram Singh believes the main challenge is to manage volatile pricing. “The slowdown in demand compared to capacity growth in Asia has put increased pressure on volumes and yield,” Singh added. Even as the overall market outlook is not without turbulences, HACTL remains cautiously optimistic for the growth of air freight in the medium to long term. “Given all the figures of the confidence index, CAGR analysis etc for the various major markets notably China, South East Asia and USA, it is to be expected the cargo growth and volume for these regions will continue to be strong this year,” believes Chan.n