Cargo deliveries set to take off after lull

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Cargo deliveries set to take off after lull

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Asiana Airlines’ freight is pictured before it is loaded at Incheon International Airport. The airline expects the air cargo market to begin recovering in the latter half of this year. Provided by the company


The air freight industry has suffered a slump due to the economic slowdown in the U.S. and debt woes in Europe, but observers forecast a recovery - albeit a very slow one.

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The increase in shipments of IT products such as memory chips, TV sets, mobile handsets and new products like the new iPad are expected to help revive the industry this year.

International sporting events, notably the London Olympic Games this summer, are also likely to give it a boost due to the knock-on effect they traditionally have on TV sales as sports fans around the world rush to upgrade their sets, market observers say.

Korean Air lost its No. 1 rank in terms of air freight volume to Hong Kong-based Cathay Pacific in 2010. Rather than try to reclaim the top position, the airline said it will instead focus on improving the quality of its service.

According to the Ministry of Land, Transport and Maritime Affairs, the amount of air cargo that moved through local airports increased 7.3 percent from a year ago to 281,000 tons in February, despite the global economic slowdown.

The ministry attributed the rise to a 6.9 percent on-year growth in international freight delivered due to higher exports of IT products. There was also a slight rise in the number of working days in February from one year earlier due to the changing date of the Lunar New Year holidays each year.

Korean Air and Asiana Airlines, the country’s two biggest air carriers, saw a slight recovery in February in air cargo delivery. Both airlines forecast that the situation will improve in the latter half of the year.

“The period from December to February is usually the off-peak season, but the amount of air cargo delivered is gradually rising, and outbound cargo is expected to recover in the second half of 2012,” a Korean Air spokeswoman said.

An Asiana spokesman echoed similar sentiments.

“Asiana’s air cargo delivery fell in January from a year ago and we were concerned about the state of the air freight market, but our freight delivery climbed 8 percent in February and now we’re more hopeful,” he said.

“With air freight delivery to North America on a recovery track, we are expecting an increase in air cargo transportation globally.”

Other industry observers say the market is bottoming out and the only way now is up.

“The industry has hit rock bottom and the situation is starting to reverse, but recovery will be very slow,” said Joo Ick-chan, an analyst at Eugene Investment and Securities.

Both Korean Air and Asiana mainly deliver IT goods, making them especially vulnerable to the global economy.

“Half the air cargo delivered by local airlines are IT products, such as the iPad 3,” said Kim Dae-sung, an analyst at Hyundai Securities.

“There are few signs that the air freight market is showing significant improvement, but it is not going to get any worse,” Kim said.

Kim said sports events like Euro 2012, the international football tournament that runs from late June to early July, and the London Olympic Games from late July to early August will increase the demand for new TV sets.

As there are no air freight companies like FedEx or UPS in Korea, cargo delivery makes up a significant portion of local airlines’ revenue. It accounts for 30 percent of Korean Air’s sales.

The airline slipped to the No. 2 position in 2010 in terms of air cargo delivery, as demand for air freight in China increased due to its rapid economic growth, creating more business for Cathay. Prior to this, Korean Air held the top spot for six consecutive years after usurping Germany’s Lufthansa in 2004.

Some analysts say Korean Air may be able to reclaim the throne but it claims it is no longer focused on competing on quantity.

“In the past, our strategy was to compete on volume, but with the rising price of crude oil, we have decided to seek qualitative growth,” Korean Air President Chi Chang-hoon said in February, when Korean Air unveiled its two new cargo aircraft, the B747-8F and B777F, at Incheon International Airport.

“Instead of the No. 1 position, we are focusing on delivering high-value-added products. Our goal is not to reclaim the top spot,” he confirmed.

Korean Air said the new B747-8F is 17 percent more fuel efficient than the old B747-400F due to its use of carbon fiber materials.

The company said it would bring in six additional B747-8F aircraft by 2016 and four more B777Fs by 2015.

Chi added that the company plans to gradually expand its cargo operations to developing regions such as South America and Africa.


By Limb Jae-un [jbiz91@joongang.co.kr]

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