JEJU, South Korea (Reuters) – Strong e-commerce need is fuelling Asia’s air cargo market, with the U.S.-China trade war having very little negative effect up until now and in many cases even improving deliveries, market executives said on Friday.
SUBMIT IMAGE: A Sichuan Airlines Jet A330-300 freight airplane waits for packing at Vaclav Havel Airport in Prague, Czech Republic, June 6, 2018. REUTERS/David W Cerny
E-commerce is growing at speed in populous Asia, driven by Chinese leviathan Alibaba Group Holding Ltd ( BABA.N) and rival JD.com Inc ( JD.O), as well as others such as Japan’s Rakuten Inc (), sponsor of Spanish soccer giants FC Barcelona.
The flow of products has been threatened this year by the United States imposing import tariffs on billions of dollars worth of Chinese products to redress what it relates to as unreasonable trade relations – with China’s federal government responding in kind.
“I believe right now we are probably going to see a pretty strong 4th quarter,” Randy Tinseth, Boeing Co’s ( BA.N) vice president for industrial airplane marketing, said on the sidelines of a market conference.
“The economy today has been really, very strong. Honestly in anticipation of this geopolitical scenario I believe people are simply heading out and moving (cargo) rapidly.”
Asia-Pacific air freight volume increased 4.8 percent in January-August, revealed data from the Association of Asia Pacific Airlines (AAPA). That was lower than in 2015’s 9.8 percent however came off a greater comparison base at a time of record deliveries, stated AAPA Director-General Andrew Herdman.
“Provided this short-term effect of rushing to satisfy due dates for tariff imposition and so on we are seeing pockets– lanes and channels– where need is more powerful than anticipated. For the next several months the freight image remains reasonably robust. The concern is what will the outlook for next year be.”
WEB SHIPPING
Asian airline companies have an outsized role in air freight, accounting for almost 40 percent of the global market as the region is a significant manufacturing center and e-commerce is growing.
“E-commerce is altering the method individuals are purchasing things, especially in countries such as Indonesia and the Philippines,” stated Jean-Francois Laval, Jet SE ( AIR.PA) executive vice president, Asia sales. “It is originating from China, from Korea, it is coming from other parts of the area. You require a big quantity of freight space.”
Boeing on Monday forecast air freight traffic would double over the next 20 years, growing at a typical rate of 4.2 percent a year.
To satisfy that demand, the airplane producer anticipates the world truck fleet to broaden over 70 percent to 3,260 planes. Around half of air freight is brought in the bellies of passenger jets, with the rest flown on dedicated trucks.
WAR PREPARATION
Some big Asian cargo carriers including Cathay Pacific Airways Ltd ( 0293. HK )and Korean Air Lines Co Ltd ( 003490. KS)count on freight for around a quarter of earnings.
“Last year the freight market was exceptionally hot. In 2018 it still grew. The trade stress in the world will have some results but we have not seen it. I see constraints being available in a very short time. Nevertheless we are getting ready for it,” Korean Air President Walter Cho told press reporters on Friday.
“Anything from the U.S. to China and vice versa is going to be impacted. We are looking at alternate markets to China and the U.S. too.”
Japan Airlines Co Ltd () President Yuji Akasaka said the trade war had actually made no modification to the cargo market to date and he just expected an impact if “extremes” occurred.
“If it does occur it might impact us in the future however since today we haven’t seen it and hope it will cool down and go back to normal,” he stated through a translator.
In the short-term, trade war effect has not been too noticeable since initial tariffs were on products not normally transported by air such as metals, AAPA’s Herdman stated. That is beginning to change, however, as duties use to more goods.
“I heard one example … Seafood from the U.S. to China goes through vindictive tariffs, so demand in China is down. Guess what? Need for Canadian seafood is doing just fine.”
Reporting by Jamie Freed; Editing by Christopher Cushing
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