Nov 04, 2024
Asia Pacific airlines have spearheaded the global air cargo growth. The International Monetary Fund (IMF) estimates that Asia will contribute about 60 percent of the global economic growth. India leads with Gross Domestic Product (GDP) growth of 6.8 percent and China expands by 4.6 percent. Vietnam’s GDP growth is forecasted at 6 percent while the other five major ASEAN countries will average at 4.5 percent GDP growth.
Several factors are driving the development of this region compared to others:
Robust manufacturing sector: Countries like China, Japan, South Korea and Vietnam boast vibrant manufacturing industries necessitating efficient transportation of goods. Strong exports from these major markets have continued to bolster the growth in cargo volume for airlines in the region.
“Asian companies are doubling down on four major manufacturing sub-segments: consumer electronics, industrial electronics, electric vehicles and semiconductors,” Jason Thomas, Chief Executive Officer of MASKargo, stated.
“These sub-segments at one point or another will experience the use of airfreight in its value chain. Globally, Asian companies make- up 60-70 percent of the top 3000 global companies in these sub-segments; and generate between 45-65 percent of the global revenue collectively. Among the world’s top 3,000 manufacturing companies, Asian companies spent almost 50 percent of the global R&D investments, whilst receiving an average of 80 patents in each of the sub-segment.
Surging e-commerce activities: The rise in e-commerce within Asia Pacific has also significantly increased the need for air freight services. The region serves as a global epicentre for online retail activities, especially for smaller white goods and technological products.
Geographical advantage: Asia’s strategic location acts as a pivotal hub for global trade, linking major markets in the region to the rest of the world efficiently. The region’s international connectivity has notably improved as travel restrictions were lifted, with significant growth observed within Asia-Pacific and between Asia-Pacific and Europe.
“The growth in routes and demand to Asia is driven by a mixture of both passenger and cargo demand,” Mike Chew, Chief Executive Officer of AAT, a subsidiary of SATS explained.
“Asia Pacific, with China and India driving developments in the region, sports the highest growth numbers in overall passenger numbers. The removal of visa requirements for travellers from key markets like China, India, and Thailand has notably boosted passenger traffic demand. The relatively steady economic growth and improving living standards in Asia Pacific are expected to continue to drive demand for air transport beyond the global average.”
Disruption boosts airfreight
For air cargo, recurring supply chain challenges in maritime shipping have made air services more competitive. The rise in e-commerce within Asia Pacific has also significantly increased the need for airfreight services.
The return of operations post-COVID has significantly impacted the growth of air traffic to Asia. As passenger confidence gradually returns and supply chains resume operations, both passenger and cargo traffic have seen an uptick. As travel restrictions were lifted, Asia-Pacific markets have marked by a significant rise in international connectivity in 2023, especially in routes within Asia-Pacific and between Asia-Pacific and Europe.
“The air cargo market has been rather resilient throughout 2024. The continued demand can be attributed to the Red Sea crisis that has yet to be resolved and the surprisingly long-drawn Russia-Ukraine war,” Thomas outlined.
“Airlines based in Asia Pacific have reaped the benefits of a robust US economy in 2024 and high demand for e-commerce. However, much remains to be seen when the US begin crackdown on China’s e-commerce exports. US monetary policy remains a very real external risk to Asian manufacturers and service providers.”
Favourable macro-economic conditions, including the normalization of supply chains and improved air connectivity, have contributed to the increase in demand for air travel. The strong performance of the Asia-Pacific region is evident in the increased aircraft orders, with 568 commercial aircraft scheduled for delivery in 2025, reflecting confidence in the region’s aviation sector.
“Despite enduring political and economic challenges, including the recent US customs crackdown on Chinese e-commerce shipments, the air cargo segment seems resilient,” Chew outlined.
“Progressing into the latter part of 2024 progresses, the economic landscape is shaped by tight labour markets, prolonged high interest rates, a strong US dollar, and consistently high oil prices. Despite these challenges, record-high employment rates remain a significant positive factor. As long as unemployment rates stay low, demand for air transportation services, a crucial sector, is likely to remain strong.”
Diversification and stability
The relative stability in Asia has provided a conducive environment for economic growth and trade activities, which has positively influenced airfreight demand in the region.
“While Europe and the Middle East have grappled with various uncertainties, ranging from political tensions to economic challenges, Asia’s comparatively stable political landscape and economic growth have positioned it as a more attractive and reliable hub for business and commerce,” Chew claimed.
“By expanding networks and exploring new markets, airlines and cargo operators have been able to capitalise on the region’s growing demand for airfreight services.”
The diversification of operations globally has also played a crucial role in inflating cargo operations across the Asia Pacific region, helping to mitigate risks, optimise routes, and tap into new markets, enhancing the overall efficiency and growth of the airfreight industry.
“The nature of partnerships and alliances have grown being just complementary to being competitive on the world stage,” Thomas explained. “We are looking beyond the airfreight industry to identify strategic partnerships that will bring about positive change for MASkargo and its stakeholders. We are not stopping now as we are working hard to build more bridges that will bring about more benefits for our customers and also the Malaysia Aviation Group.”
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Author: Edward Hardy