question of the month


There has been a dramatic increase in air freight rates as global economic activity increases, but capacity has been slow to catch up with demand. Are carriers managing their carrying capacity to maximise yield?


GEORGE MIKHAILOV Executive director – China,


Chapman Freeborn Airchartering


“In my view the increasing rates we saw recently was purely a temporary occurrence. Those airlines who were less optimistic and did not massively increase their scheduled flight frequencies and air freight capacities at the time of the high rates were probably right to have made those decisions. “We are now already seeing a very weak air freight market in China, with very low rates. This reminds me of the situation during the previous years when nine months in a year there was always more capacity to be found than cargo. “As an example of the


BHARAT THAKKAR


Joint managing director Zeus Air Services and vice president of ACAAI (Air Cargo Agents Association of India)


“It’s not that the recovery is short-lived, but that the market is just coming back to its normal shape”


current situation, in the last quarter of 2009 the air freight rates from China to Europe and China - US were around US$6 a kilo. At the beginning of 2010, due to the ash cloud situation, when most flights in Europe were cancelled for six days, the rates out of China to Europe for the most urgent cargo went up to $15/kg – and, probably the most expensive B747F charter was sold at around $1 million for a single Shanghai – Frankfurt flight. “But what we see now is a very weak market in June/July, with the rates at just $2.6/kg for China - Europe and around $3.5/kg for China - US. This is lower than the operating cost of the aircraft on these routes. Again, the scheduled operators are struggling to fill the cargo capacities even at such low rates, the same situation that we saw in previous years. “Therefore, I would say it’s not that the recovery is


short-lived, but that the market is just coming back to its normal shape.”


“There has been strong demand for space in the last two quarters of this year and the June figures released by IATA showed an increase of over 25 percent in comparison to the same month of 2009. So, I would not call it a short-lived air freight recovery, but – come July – demand out of India slowed down and most airlines are now happy to accept cargo at rates almost 40 percent lower than was the case during the period of significant capacity shortage caused by the ash cloud in the skies above Europe. “Because of rising costs,


“Because of rising costs, airlines are being very cautious in increasing their capacity”


airlines are being very cautious in increasing their capacity. Operating freighters, one can live with a backlog but not while operating half-empty aircraft. We have moved on from an era in which freighter- operating airlines dominated the Indian market; thanks to a marked increase in bellyhold capacity available due to the Indian government’s open skies policy, and high fuel price, these airlines have lost market share, not only withdrawing freighters to and from India but drastically reducing frequencies on other routes. “With many passenger airlines having pulled out


of India in the past 18 months, carriers are now managing their capacity on a supply and demand basis, in order to recover losses and to try to increase yield. The result is a backlog during the peak January to mid-June period, but you can move freight as you want during the non-peak months.”


AIR LOGISTICSCHINA 43


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