What air cargo can tell us about the global economy

Every now and then, a news article reminds us that air cargo is, or has been, considered a bellwether of the state of the global economy. As the Wall Street Journal recently explained, in an article on the stumbling Chinese economy:

“Air cargo is widely tracked as a leading indicator for trade because shippers deciding whether to send items by plane are often swayed by last-minute economic developments. The recent drop in volumes has analysts concerned, even as maritime shipping out of Asia has remained healthy.”

This follows a stagnant couple of months in the air cargo market, where volume grew only 0.7% in July—the lowest of the year. A drop in air cargo traffic to and from China is specifically viewed as evidence that the economy is wobbling, in the wake of the Chinese government devaluing the yuan in order to reinvigorate exports. This was followed by plummeting Chinese stock markets and worldwide drops in share prices.

In the same way that Chinese exports have an impact on the overall volume of global air freight, so too does the Chinese economy affect the global economy—and one is often a good indication of the other. So when economists aren't seeing growth in air cargo, it could very well be a symptom of a larger problem.

Freightfully important

Part of this connection is because air freight is itself a huge facilitator of global trade. According to the International Air Transport Association (IATA), over US$6.4 trillion worth of goods—approximately 35% of world trade by value—is transported by air cargo. This is because air cargo supply chains make it possible to deliver high quality goods efficiently and at relatively economical prices.

The IATA is also quick to point out that air cargo creates millions of jobs, as well as being a vital component in the implementation of worldwide health and immunisation programmes, not to mention disaster aid.

As such, air freight is viewed as a reliable indicator of economic changes not merely because it reflects the ebbs and flows of the economy, but because it plays its own massive role in global trade.

So one way or the other, it makes sense for the analysts to keep a close eye—and to worry a little at signs of stagnation, even when there may be growth in other areas like sea freight.

Transglobal Express offers worldwide freight forwarding with all major carriers. To keep up to date with air freight industry news, follow our news and updates. 

(Image credits: John Murphy, Robert Stanklewicz under a Creative Commons 2.0 license.)

Massive surge in crab deliveries for Guangzhou's mid-Autumn festival

Chinese carrier China Southern Airlines is expected to deliver 2.7 tonnes of crab every single day of September to meet the massive demand for curried crab dishes for the Guangzhou's mid Autumn festival - thats approximately 1000 crabs a day!  The crustaceans are being imported from across Asia, with Bangladesh, Thailand and Malaysia supplying the majority.

China Southern Airlines has set strict time limits for all stages of the delivery operation, with a time limit of 80 minutes set between when the crabs reach the airport and when they are expected to arrive at Guangzhou harbour. 

Deliveries of perishable foods such as the meat of these tasty crustaceans often requires a specialist temperature-sensitive as well as time-sensitive service. For shipments to China of ambient goods, or other non-foodstuffs, which do not require the maintenance of a particular temperature, shippers can save a great deal of money by booking with a reseller such as Transglobal Express, who offer the services of quality global carriers such as UPS, FedEx and DHL at up to 70% off the standard prices. Click here to get a quote.

DHL launches new weekly train link from China to Poland

DHL Global Forwarding, the freight division of mail and logistics group Deutsche Post DHL, has developed a new door-to-door delivery service between Europe and China, it was announced earlier this week. In partnership with rail operator YHF logistics, DHL will offer a new train service between Chengdu in South West China and Poland, cutting transit times by 40 days compared to ocean freight. 

The new 14-day long route to Malaszewicze, Poland, costs just a sixth of the air freight cost for the same journey and, after passing through DHL's Polish hub, includes an onward route to Moscow via truck, meaning a transit of 20 days from China to the Russian capital. 

Asia Pacific CEO for DHL Global Forwarding acknowledged it may seem counter-intuitive to ship through Russia, to Poland, then back to Moscow but defended the move in an interview with Post and Parcel on the grounds that it enabled avoidance of the complex and potentially problematic Moscow rail system. "Our innovative multi-modal team has found that mixing two different modes of rail and truck and taking this route in fact cuts transit time and transport costs significantly by pre-empting and overcoming potetnial delays that be encountered when entering Moscow by rail," he said.

Bi-lateral trade between Poland and China grew 11.2% year-on-year in 2012. DHL is doubtless aware of the growing importance of China to the Global Economy and to its own future profitability. The company recently held its annual technology conference in Shanghai, China, at which the importance of the Asian market was a prime concern. The logistics provider also dedicated the opening pages of its 2012 annual report to a special chapter on China entitled, "Pioneering Future Markets".

Source: Post and Parcel

East Asian air cargo suffers from weak demand

Recently published performance figures for Cathay Pacific - the flag carrier of Hong Kong - and China Airlines and EVA Airways - the two largest carriers of Taiwan - indicate that the air cargo slump is set to continue.

123,805 tonnes of cargo and mail were carried by Cathay Pacific and Dragonair in April,  a year-on-year decrease of 0.6%. Capacity grew by 1.5% but cargo and mail revenue tonne kilometres fell 2.4%. China Airlines also registered a 1.65 percent drop in accumulated sales figures for the first 4 months of 2013 compared to 2012. EVA Airways, Taiwan's second largest carrier, saw a 3.35 percent drop in revenue. 

Cathay Pacific's CEO John Slosar remains positive about his company's adaptability. In an interview with Air Cargo Week, he stated, "We didn't anticipate the markets being down for such an extended period, and we have had to be nimble and flexible in our response, cutting back freighter capacity in line with demand at the same time as trying to develop new markets. Our cargo teams have been doing a great job in this regard. We have adapted well to the short-term challenges and at the same time have been looking to the future".

Nevertheless, Slosar's optimism about the future for the air cargo industry is quelled by his doubts about the global economy as a whole. He commented, "[The industry] has been in a slump for more than two years now- an unprecedented length of time - and there is still no indication that things are about to change for the better. There are few positive signs of the world's economy getting back on a firmer footing and the simple fact is that cargo demand won't see any sustained uptick until that happens."

Weekly News Round-up: what's been happening in the world of sea freight, air freight and international courier services?

Welcome to our weekly round up of industry news and blog posts! Click the links below to read more about any of the stories we've published this week.

Freight news:

IATA publish air freight market reports for March 
TIACA and ICAO to work more closely together
Aviation is key to Africa’s future

Carrier news:

UPS announce improvements to Boeing 767 fleet
Deutsche Post DHL sees 5.9% drop in profit in first quarter of 2013
TNT Express are developing their Middle East business
FedEx begin construction on new Solar Technology Park
DPD to open hundreds of new outlets in Baltic states

Technology:

UPS launches new tracking app for i-Pad
New FedEx competition highlights carrier’s focus on social media

Special deliveries:

DHL secretly transports new Mercedes S-Class in time for its global premiere
TNT send twin pandas from Madrid to Chengdu

Focus on....China:

Exporting to China: advice for SMEs

Transglobal Express in the news:

Post and Parcel: Online approach helps growth at Transglobal Express

Exporting to China: advice for SMEs

As well as being the most populous country, China has by far the biggest export economy in the world, with estimated exports of almost $2 billion in 2011.* In addition to these astronomical export figures however, recent reports suggest that China's import economy is also booming, meaning increased opportunity for British companies looking to export to China.

In March, imports to China surged 14%, much more than the 5% predicted by analysts. While much of this can be accounted for by imports of commodities by and from big business, SMEs also play their part, and parcel delivery companies such as Transglobal Express have recently witnessed increases in the volume of parcels they send to China. If you're thinking of expanding your business by exporting to China or even if you want to send parcels to China on a small scale but economical price, we have some great tips and information for you. 

Know your markets

China's astonishing economic growth over the past two decades represents excellent business opportunities for UK SMEs, but that doesn't mean it won't require, effort, market research and the development of strong relationships in order to be successful there. The Chinese market has huge potential, but it's not the place to make a fast buck: get to know your market, show you are there for the long-term rather than quick-wins, and do your research to find appropriate gaps in the market. 

Reduce your costs

Developing your business model to include exporting to China will, of course, entail a whole range of direct costs. As well as the manpower and time invested into researching your markets and developing relationships, the cost of shipping your items overseas will be an important factor in your business plan. International Courier services such as Transglobal Express offer extremely reduced rates on services such as DHL, UPS and TNT Express. If delivery costs are a vital aspect of your business, it makes since to reduce them as much as possible, without having to compromise on quality. Transglobal Express have parcel delivery rates to China for less than £2.96 per kg, depending on how much you are sending. Click here for a bespoke quote

Consider your marketing strategy

With the UK being one of the most developed e-commerce economies in Europe, most British businesses are aware of the importance of on-line marketing and, specifically, the importance of appearing as high as possible on the first page of Google. Baidu, not Google, is the dominant search engine in China and Baidu requires different SEO strategies from those that work with Google. Do your research and adjust your strategies accordingly.

If you'd like any further information about the variety of shipping options and prices for sending goods to China, please contact our customer services team on 0845 145 12 12. 

For industry news, follow us on Twitter @TransGlobalExpr

Happy Shipping!

*World Trade Organsiation, "World Trade 2011, Prospects for 2012"

DHL strengthens China-Europe links with high-speed trans-Siberian rail

DHL Global Forwarding, Freight -  the air, ocean and road freight division of German logistics giant Deutsche Post DHl - are expanding the services they offer between Asia and Europe. 

Image c/o DHL

Two new routes are now available that combine rail and road transportation: the first entails daily departures from Shanghai to Europe via the Trans-Siberian route; the second is a weekly departure from Chengdu through China's West corridor rail line. The new plans come shortly after DHL announced further development of its Asian network last month. Compared to current sea freight modes, customers are expected to benefit from reduced door-to-door lead times of up to 21 days compared to ocean freight, and - according to DHL -  a 90% reduction in CO2 emissions compared to air freight.

A primary benefit of the first new route from Shanghai is that customers have the option of booking variable capacity. Amadou Diallo, CEO of DHL Freight, described it as a flexible solution with which customers can opt for capacities  "ranging from a single container to a whole train."

The route from Chengdu is targeted towards customers based in the Szechuan capital. It is faster than the trans-Siberian route by up to eight days and has been introduced to address widening demand in China. The service departs on Fridays and reaches Europe via China's West Corridor rail line through Kazakhstan.

Source: DHL

TNT Express announce divestment from China and Brazil following vetoed UPS merger

TNT Express unveiled its updated strategy and profit improvement plan on 25th March. The failed merger with UPS following an EC veto saw falls in the Dutch courier company’s share price and companies had been awaiting its renewed strategy as a standalone company.

Image c/o TNT Express

 

The new plan entails divestment from China and Brazil and a focus on the company’s European network. In addition, 4,000 jobs will be lost by 2015 in a bid to create a leaner management structure, saving €220 million in operational costs.

While TNT have a very strong European network and hold 17% of the internal European Express Market, Martin Bakker of ABN Amro has stated that, “in China they are just a drop in the ocean, they lack the size and position to defend themselves…It’s better for them to say goodbye to China.”

TNT state that “the sales process for domestic China is well underway and the outcome should be known imminently”. Preparations for the sale of Brazil Domestic are also under way.

Interim CEO Bernard Bot commented: “our business faces difficult market conditions and strategic challenges but we have a unique competitive proposition: an unrivalled European network, worldwide connections, an integrated range of service and recognised dedication to our customers.”

Source: TNT

FedEx connects China with Europe via new 777Fs air freight service

FedEx Express has launched a new air freight service connecting the Chinese gateway cities Shanghai and Guangzhou with Frankfurt Airport in Germany. 

The freighters will fly out five times a week, Tuesday to Saturday and enable FedEx customers to import and export goods from China or Europe. According to FedEx, this is the first time that a direct 777Fs flight has been launched from Guangzhou Baiyu International Airport to Europe.

Moreover, customers will be able to ship good quickly and efficiently whilst also benefiting from the large air cargo storage inside the freighters without an extensive use of fuel. Both freighters are said to be highly fuel-efficient with a low carbon offset.

Image c/o logisticsweek.com

China is Europe’s second largest export partner and trading partner as well as the largest import country in Europe. In Q1 of 2012, the trade value was estimated at EUR 105.6 billion. FedEx Express is responding to this growing trend by adding more air freight services to its product range and has recently expanded the Shanghai Gateway.

Source: Analytiqa.com

Air freight on the rise in the Middle East and Africa

Recent stats published by the International Air Transport Association (IATA) showed some small, but significant improvements in the air freight industry.

Whilst Asia Pacific is still struggling with a decline of 7.3 percent, the Middle East positions itself amongst the growing markets with a increase in demand for air freight by approximately 14.5 percent. According to Analytica, the reason for Asia Pacific’s decrease can be found in the weakening export in China.

Although Western nations continue to face difficult times in current air freight markets, the Middle East and Africa appear to be on the “bright side” of business life. In fact, African carriers can pride themselves with a 6.1 percent increase in demand and an impressive 9 percent increase in capacity.

For more information on freight traffic market shares of regional carriers please refer to the following graph:

Sources: Analytica, Transglobal Express (graph)

DHL ships iPad 3 via DHL Freight

According to the U.S. blog, Business Insider, Apple Inc has decided to ship its new iPad 3 via DHL air freight. 

Apple Inc is said to have paid the freight forwarder a large sum for the delivery of its latest tablet device. The iPad 3 will be shipped from China to the USA. 

Apple-focused blogs such as Appleinsider and Macrumours mentioned talks about air freight rate increases of up to 20 percent because of Apple.

Today, the iPad 3 is supposed to be presented to the world at a media conference in San Francisco.

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• Manchester United and DHL Express travel around the globe as part of the Champ19ns Trophy Tour 
• Parcels to China and Vietnam: DHL launches new freighter flights 

Parcels to China and Vietnam: DHL launches new freighter flights

In future, it will be even easier to deliver parcels to China and Vietnam because of DHL’s latest joint venture with Yangtze River Express Ltd. The Chinese cargo airline will operate new direct flights from the DHL hub in Hong Kong to Chengdu in China and Ho Chi Minh City in Vietnam.

This is a result of the rising demand for express parcel services in busy economic centres such as Chengdu and South-western China. Each of the new five B737-300F freighters will carry a total load of 22 tons and fly out five times per week in order to deliver parcels to various parts of China and Vietnam.

Beyond that, the international courier, DHL, has promised to offer the following parcel services: evening pick-up and next-day delivery with 10pm being the latest collection time.

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