Air cargo benefits from US port troubles

The first quarter ended on a positive note for Asian air cargo providers. According to the Association of Asia Pacific Airlines, freight tonne kilometers (FTK) increased 8.4% for the quarter and for March, it was up 1.7%. According to Andrew Herdman, Director General for the association, “Asian airlines saw international air cargo demand grow by 8.4%, partly boosted by the dispute affecting maritime shipments at US west coast ports.”

Indeed, companies are noting this similar trend. Cathay Pacific reported cargo volume was up 1.5% for March. However, for the quarter, the chief executive said in an interview with South China Morning Post (SCMP) that the airline reported a 15.4% increase in revenue per tonne-kilometer compared to first quarter 2014. He further noted that while Asia-Europe routes remained weak, Cathay Pacific has benefitted mostly from the transpacific route. “We are benefitting a lot from the congested sea port situation in North America. We do not see that resolved in the short term.” He told SCMP.

The US-based freight forwarder Expeditors International of Washington also noted exceptional gains for the quarter, with total air freight tonnage up 13%. Bradley Powell, Senior Vice President and Chief Operating Officer, said that air freight volumes received “some degree of unquantifiable benefit” from west coast congestion and the timing of the Chinese New Year. Its total net revenue from North Asia increased by a whopping 25.7% to $117,425,000 and the company also saw a 7.9% increase in total net revenue from South Asia to $42,200,000 (note: total net revenue by region includes revenue from all services).

Even C.H. Robinson indicated that the port delays helped it “a little bit” but it also has not been able to quantify it. Its total global forwarding services net revenue increased by 15.2% with air transportation up 18.2% for the quarter. C.H. Robinson’s freight forwarding activities have benefitted from its 2012 acquisition of freight forwarder Phoenix International which is particularly strong on the transpacific lane.

Additional entrants are set to compete on the transpacific lane. In early April, All Nippon Airways (ANA) received approval from the Japanese regulatory authority for its joint venture with United Cargo. The agreement, announced in November, 2014, will provide scheduling, pricing and sales for cargo handling along this lane.

Also, Cargolux is benefitting from its partnership with China’s Henan Civil Aviation and Investment Company by expanding its Chicago and Zhengzhou service to twice weekly.

Will providers continue to benefit from gains on the transpacific route? Perhaps, as the US economy remains healthy and if there is any hint of additional supply chain disruptions.