Asian air cargo boosting profits for major airlines

An increase in airfreight of semiconductor and auto parts has led to soaring earnings for carriers like Cathay Pacific Airways and Singapore Airlines, according to a report by Reuters.    Increasing demand for air cargo has boosted earnings for major Asian airfreight carriers, according to a Reuters report.
   Given the region’s 40 percent stake in the global market due to Asia being a manufacturing hub, carriers like Cathay Pacific Airways and Korean Air Lines see nearly a quarter of their revenues coming from freight.
   According to Reuters, air carriers are benefiting from downturns in semiconductors and auto parts inventories, leading customers and manufacturers to utilize airfreight rather than ocean shipping for replenishment thanks to its faster transit times. As a result, global air cargo volumes grew 10.4 percent in the first half of 2017, the strongest half-year performance in seven years and nearly triple the industry’s average growth rate of 3.9 percent in past five years, according to data from the International Air Transport Association (IATA).
   Cathay Pacific Airways saw a 12 percent rise in first-half cargo revenue, along with rising yields for air cargo, for the first time since 2011. Singapore Airlines, which posted a $6 million profit in the first quarter compared to a $34 million loss the same period a year prior, has said that customers are securing capacity for the year-end peak season in anticipation of major product launches, according to Reuters.
   “Cargo, far from being a drag, is now back as a profit contributor, even for freighters,” Andrew Herdman, director general at the Association of Asia Pacific Airlines told Reuters.
   “The boom in restocking goods like auto parts and chips via air freight is expected to end some time around the end of the year,” said IATA Chief Economist Brian Pearce. “But growth in e-commerce and a shift by pharmaceutical companies to air for safer cold transportation of drugs is expected to continue to support demand. I would think that we would see strong growth still in the second half of this year with a return to more normal [growth] levels perhaps next year.”