Auto parts help plug freight gap for local carriers

Home > Business > Industry

print dictionary print

Auto parts help plug freight gap for local carriers

Hyundai Motor’s race to meet U.S. demand for Elantra and Sonata cars is helping Korean cargo carriers withstand a global freight slump.

Korean Air, the nation’s biggest carrier, boosted U.S. auto-part shipments 16 percent in the first 10 months as Seoul-based Hyundai and affiliate Kia Motors Corp. ramped up U.S. production because of surging sales.

Second-ranked Asiana Airlines Inc. has also seen a pick up in component shipments that has slowed an overall decline in volume, Senior Vice President Kim E Bae said without elaboration.

Korean Air, the world’s second-biggest international cargo carrier, filled 74 percent of capacity in the third quarter, compared with about 65 percent at Cathay Pacific, as rising volumes of car sensors and display panels, as well as capacity cuts, offset slower shipments of liquid-crystal display TVs.

Asia Pacific Airlines’ cargo traffic fell 4.1 percent this year through September as the slower economy sapped trade, according to the International Air Transport Association.

“Korean airlines are benefiting, to a certain extent, from the strong demand for Korean cars,” said Jee Heon-seok, an analyst at NH Investment & Securities Co. in Seoul.

Hyundai shortage

Hyundai is running its only U.S. plant, in Alabama, at 115 percent of capacity to meet demand as Japanese carmakers struggle with a stronger yen and supply disruptions following Japan’s March earthquake. The automaker’s U.S. market share declined in the third quarter because of a lack of cars, Chief Financial Officer Lee Won-hee said on Oct. 27.

“More auto parts are expected to be shipped by plane in the second half, continuing the trend seen in the first half,” Korean Air said in an e-mailed response to questions. “We expect demand to grow further should the free trade deal with the U.S. take effect.”

The free trade agreement, which will eventually remove tariffs on most products exported between two countries, was signed into law by President Barack Obama last month. Korea’s legislature has yet to vote on the accord.

Hyundai boosted U.S. sales 20 percent in the first 10 months to 545,316 vehicles, outpacing a 10 percent increase in the overall market. Kia, which has a plant in Georgia, boosted sales 35 percent to 405,095. The carmakers had a combined 9.1 percent market share.

Thai floods

Sales growth is likely to continue into next year as Toyota Motor and Honda Motor face a shortage of parts following flooding in Thailand, which is compounding the difficulties they faced after the Japan temblor, said Song Sang-hoon, an auto analyst at Kyobo Securities in Seoul.

“There have been a series of unfortunate events for Japanese automakers recently, which has helped increase sales for Hyundai,” he said. “Their luck keeps holding up.”

Korean Air, which generated 33 percent of sales from freight last year, carried 22,559 tons of auto parts in the first 10 months. Total volume was 1.28 million tons. Its third-quarter load factor fell 1.1 percentage points from a year earlier after a 4.6 percent reduction in capacity.

Cathay cargo

Cathay Pacific, the biggest carrier of international air cargo, had a 6.4 percent decline in volume to 1.24 million tons in the first nine months. Capacity rose 9.8 percent. The Hong Kong-based carrier’s freight load factor was 64.8 percent in September, 5 percentage points lower than a year earlier.

“Cargo needs the world’s economy to pick up again,” said Cathay Pacific Chief Executive Officer John Slosar. Korean Air shares have tumbled 33 percent in Seoul trading this year.


Bloomberg
Log in to Twitter or Facebook account to connect
with the Korea JoongAng Daily
help-image Social comment?
s
lock icon

To write comments, please log in to one of the accounts.

Standards Board Policy (0/250자)