Asia-Europe Air Freight Growth But Challenges Face

2024 marks a relatively favorable year for air cargo demand on the Asia-Europe trade route. However, forecasting operating conditions this year remains a difficult problem to solve.

Strong demand growth

Mr. Jae Dong Eum, Senior Vice President and Head of Cargo Business at Korean Air, said that in the first half of 2024, total air cargo demand from Asia to Europe increased by about 23% compared to the same period last year.

However, while demand from Europe to Asia also increased by 7% thanks to the recovery in markets such as China, Southeast Asia and Oceania, Korean Air faced difficulties maintaining load factors on its main routes to Korea and Japan due to weak demand in these two markets.

Tom Owen, director of cargo at Cathay Pacific, added that Asia-Europe volumes remained strong thanks to the boom in e-commerce. Meanwhile, the flow of cargo from Europe to Asia also recorded stable demand, especially for key products such as pharmaceuticals and luxury goods.

Market drivers

Several major European airlines, such as Finnair Cargo and Air France KLM Martinair Cargo (AFKLMP), also took advantage of the increased demand on this trade route. AFKLMP representative Bénédicte Duval shared that since March 2023, demand on the airline's routes has increased due to e-commerce and the impact of the geopolitical situation in the Red Sea region.

Ms. Duval also emphasized that the trade route from China to Europe and the Americas is very active, in which India and Southeast Asia play an important role thanks to shipments of pharmaceuticals and high-tech products.

In addition, forwarders such as CEVA Logistics have also recorded a significant increase in demand for air freight services. Mr. Loic Gay, Global Director of Air at CEVA Logistics, said that the company has received many requests from manufacturers in Thailand and Vietnam, especially on the East Asia - Europe and Trans-Pacific routes.

Geopolitical challenges

The Russia - Ukraine conflict has created major changes in flight routes. The inability to use Russian airspace has forced flights from South Korea to Europe to be extended by more than two hours, affecting business efficiency and operating costs.

In response, Korean Air has restructured its routes to reduce costs. Similarly, Finnair Cargo has adjusted its routes and increased risk monitoring. AFKLMP has chosen to fly over the Arctic instead of Kazakhstan, although this inevitably leads to competition with Chinese airlines that are still allowed to use Russian airspace.

The situation in the Red Sea and the Middle East has also had a major impact, causing some cargo flows to switch from sea to air to reduce risks, despite higher costs.

Capacity and rates

Air transport capacity on the Asia-Europe route is being affected by many factors such as market demand, operating costs and economic conditions. A representative of AFKLMP said that during the peak season at the end of 2023, demand far exceeded actual capacity, forcing many airlines to adjust rates.

CEVA Logistics also highlighted that capacity shortages have forced the company to charter additional flights from Asia to Europe, especially during peak periods such as the end of the quarter or before major holidays.

Positive growth and expectations

Despite the challenges, the Asia-Europe trade lane has seen strong growth, particularly driven by e-commerce and high-value items such as automotive components, pharmaceuticals, and technology equipment.

Endy Chan, Head of Air Freight Asia-Pacific at Dachser, said that markets such as China, Vietnam, and India continue to play an important role in this growth, while markets such as Indonesia, South Korea, and Japan are stable but not showing much breakthrough.

However, he also warned that capacity bottlenecks may occur during peak periods, causing freight rates to rise above average levels.

The current Asia-Europe trade route is a dynamic but complex picture, with both growth opportunities and geopolitical challenges intertwined. Airlines and logistics providers are constantly adjusting their strategies to meet market demands and ensure profitability in a competitive environment.

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Source: Phaata.com (via AirCargoNews)

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