EXTRANS GLOBAL - Air Freight News - Week 17 2024

Air Cargo General

1) The 'Supply' will dominate the market until the fourth quarter" - IATA CNS event

According to the "CNS Partnership Conference" organized by IATA in Dallas, Texas, USA, participants are confident that the current surge in air cargo demand reflects the upcoming focus on "space" in the air cargo market.
The majority of attendees agreed that the remaining period of this year and the fourth quarter will be the most active time for the air cargo market. They emphasized the need to focus on securing supply space before entering the peak season.
An expert emphasized that "in 2024, supply will become the king of the market, leading to a division between forwarders who can immediately provide space upon customer request and those who cannot."
Airlines are actively considering additional supply securing measures, while forwarders are increasing contact with airlines and charter companies that have available supply. However, it is generally believed that the resulting rates may not be as affordable as expected, whether they are contract rates or market rates.
Another panel expert mentioned that "US consumer purchasing is recovering. Geopolitical risks following the Suez Canal incident and the closure of Iranian airspace will ultimately restrict air cargo supply, leading to an increase in rates. The fourth quarter is expected to be the hottest period."
Furthermore, it is noted that "fortunately, everyone attending this event has learned how to navigate during the pandemic. Both shippers and forwarders have a high understanding of supply chain disruptions. Based on the lessons learned over the past three years, we know what we need to do."
Most panelists believe that forwarders who have secured supply space for their customers will weather the storm this year. After a relatively quiet summer and a temporary slowdown in seasonal demand, they are confident that the market will become robust from the end of the third quarter to the end of the year.

2) Strong export growth in e-commerce from China expected in the second half of the year, with anticipated space shortage

The continuous expansion of demand in the Chinese e-commerce market, driven by the emergence of new platform operators, has led to high expectations for the peak season in the fourth quarter among stakeholders in the air cargo market. The prolonged effects of the Suez Canal incident, which have disrupted maritime transportation, have also contributed to a modal shift from ocean to air transportation, further boosting overall air cargo demand.
As a result, market players are naturally concerned about the shortage of cargo supply space in the peak season after the fourth quarter, when demand for general cargo is expected to concentrate. In fact, airline agreements, such as BSA (Block Space Agreement) and charters, are already being rapidly progressed based on this situation.
Currently, the growth in air cargo market demand is mainly driven by the surge in Chinese e-commerce exports. Market players such as Shein, leading the fast fashion industry, and online platform markets like Temu and Alibaba, are absorbing all available air freight capacity for shipments originating from China, taking advantage of the low reliability of ocean container shipments due to the Honghai incident.
Naturally, the supply of flights from China and Hong Kong to the US and Europe is dwindling, and the competition for transshipment space via airports in Taiwan or Incheon is also fierce. Consequently, many forwarders are struggling to secure stable fixed space for their customers, and concerns and worries about this situation persist until the end of the year.
Many market experts have concluded that the global air cargo supply has not been able to keep up with the surge in demand due to e-commerce, particularly until April. They point out that as of March, 35% of air cargo demand in the Asia-Pacific region was filled by Chinese e-commerce, and this trend has continued since April and is expected to persist until the end of the year.
Although the contracts of charter companies operating in the US and European markets have increased, expanding the overall market space, concerns about space shortage still remain. This situation has led traditional air cargo users, who are not involved in e-commerce, to prepare to switch to ocean freight depending on the resolution of the Honghai incident. While they prefer short-term contracts, airlines with confidence in the sustained demand from e-commerce are encouraging long-term space agreements through BSA providers. Consequently, the concern about space shortage for general cargo shippers is deepening.
Furthermore, the confidence of airlines is bolstered not only by the robust e-commerce demand but also by a strong belief in the global economic recovery by the end of the year. Although uncertainties regarding economic recovery still exist, overall geopolitical risks and the US interest rate cut, combined with the economic outlook, are favorable for the air cargo market.
In particular, the global shipment volume of smartphones, a traditional and steady customer of the air cargo market, has been increasing continuously since the first quarter, with a 7.8% growth, and is expected to continue until the end of the year. Additionally, the increase in the US Manufacturing Purchasing Managers' Index (PMI) by 2.5 points compared to February, the recovery of production in China and the UK due to the manufacturing index, and the increasing trend of container imports according to the National Retail Federation (NRF) all indicate a positive outlook for the air cargo market until the end of the year.

3) CMA CGM AirCargo, Incheon operation in June

CMA CGM Air Cargo announced that it has revised its existing cargo aircraft introduction plan, increasing the number of B777-200F from 2 to 3, and A350F from 4 to 8. They also stated that they will operate on transpacific routes connecting Asia and the United States, aligning with the introduction of the new freighters.
The two B777F aircraft scheduled for this year will arrive in June and within the fourth quarter, while the third aircraft is planned to be delivered in early next year, allowing for the immediate inclusion of Hong Kong, Chicago, and Seoul (Incheon) in their routes.
They are also considering direct flights from mainland China to North America, and the route airports will be announced soon.
In particular, they recently announced collaboration with the global GSSA group, ECS, and have completed various pre-operations for the transpacific routes. Therefore, once the freighters arrive, they are expected to be able to provide immediate services.
On the other hand, the 8 A350F aircraft scheduled for future introduction will be possible from 2026 to 2027, with the purpose of further expanding global hub airport routes.
However, some market players have expressed concerns about the disclosure of cargo information due to the presence of CMACGM's subsidiaries, CEVA Logistics and Bollore.
While CMACGM has denied any possibility of such incidents, it is analyzed that it may take a considerable amount of time to gain trust in the market.

4) Vietnam, all indicators point to economic recovery

Vietnam's exports in the first quarter of this year increased by 15.5%, while foreign direct investment (FDI) inflows grew by 13.4%. The number of foreign tourists also saw a remarkable recovery, with a 72% increase, reaching pre-pandemic levels. GDP grew by 5.66%, approaching this year's target.
Despite the uncertain external environment, the Asian Development Bank (ADB) evaluated that Vietnam's economy maintained growth in the early stages of 2024. During a meeting held in Hanoi on April 11th, it was projected that Vietnam's economy would grow by 6.0% and 6.2% in 2024 and 2025, respectively.
The General Statistics Office (GSO) reported that in the first quarter, the number of newly established businesses nationwide reached a record high of 36,224, the highest in a decade. When including businesses that resumed operations, the total number reached 59,848.
This economic boost is based on the recovery of exports driven by global demand. According to the GSO, the export of cameras, camcorders, and components in March 2024 exceeded $720 million, showing a remarkable increase of 75.6% compared to the same period last year.
Many clothing companies reported a 10-15% increase in exports in the first quarter compared to the previous year, and they received sufficient orders to continue operations until the third quarter. According to customs data, exports in the first quarter of 2024 recorded $9.53 billion, a 9.62% increase.
According to the Vietnam Association of Seafood Exporters and Producers (VASEP), canned tuna exports increased by 53% compared to the same period last year, reaching $196 million. In the first quarter of this year, tuna products were shipped to over 80 markets, significantly more than the 70 markets during the same period last year.
Vietnam's middle class currently accounts for 13% of the total population, and it is expected to increase to 26% by 2026. It is also projected that Vietnam's GDP per capita will surpass $5,000 in 2024.
As the economy recovers and business activities pick up, the middle class will be the first to experience increased demand, leading to a growing interest in new products. Consumers, as they become aware of their desires and feel the demand, are particularly likely to make purchases linked to new products.

(1) Korean Air (KE) to commence new route between Incheon and Macau from July 1st

Starting from July 1st, Korean Air will operate the Incheon-Macau route seven times a week, on a daily basis. The aircraft model will be the 'B737-800'.

ICNMFM KE169 2115/2355 DAILY, MFMICN KE170 0140/0600 DAILY

(2) Air Astana (KC) to resume Incheon-Astana route

ICNNQZ 2W(D47) KC210 0730/1115, NQZICN D36 1955/0630 A321, starting from June 15th

The existing route ICNALA will be upgraded to operate with B767 and increased to daily flights.

(3) Jin Air (LJ) to resume Incheon-Hong Kong route

ICNHKG LJ701 DAILY 2220/0055+1, HKGICN 0200/0630 B772, starting from July 18th

(4) WestJet (WS) to commence new route between Incheon and Calgary, and plans for codeshare with Korean Air

Starting from May 17th, WestJet will operate a new route between Incheon and Calgary, and also expand codeshare partnership with Korean Air, with Korean Air flight numbers to be sold.

ICNYYC WS0087 2140/1700 B787 Dreamliner D146

(5) G&H Shipping and Logistics signs GSA contract with Canochark Airlines (HH)

G&H Shipping and Logistics has signed a GSA contract with Canochark Airlines, which has its hub in Tashkent, on March 29th.

Currently, the route between Tashkent and Incheon is under application for permission from the Ministry of Land, Infrastructure, and Transport, and further discussions on cargo services will be held with the headquarters.

HH operates flights to destinations such as Jeddah, Medina, Moscow, St. Petersburg, Tel Aviv, Phuket, and has plans to commence new routes to BKK/KUL/MAD/MIL/CDG/SHA/ICN in the future.

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