With a large population base, robust economic growth and global manufacturing hubs, the Asia Pacific (APAC) region has proved to be incredibly and increasingly attractive. 

There are several factors driving this strong growth: chiefly, it’s the continuing development of global e-commerce demand, for which China is the main source of goods, followed by emerging economies such as Vietnam. But there is also strong growth intra-Asia due to increasing wealth and industrialisation driving consumer demand for Western goods. Manufacturing recovery in China and India has also driven an increase in international air cargo demand as businesses shift to air freight amid shipping disruptions.

“With purchasing power in the region having also increased, trade in and out of the region has grown tremendously,” Chaminda Perera, Head of Cargo of SriLankan Airlines, stated. 

The growth in air cargo demand is primarily driven by a combination of passenger demand and the full recovery of operations post-pandemic. The recovery has improved connectivity and capacity in the air cargo sector, with available cargo capacity rising. Growth is also being driven by increased appetite in the market for speed in this region – and by air is the fastest way to move things across the region.

“The region is becoming increasingly attractive to tech manufacturers, further boosting demand for air cargo services,” Francis Antony, Head of Cargo Commercial at Teleport, explained. “We are seeing increased logistics needs coming from the pharmaceutical industry due to rising global demand for medical supplies and medications.” 

e-commerce

e-commerce in all its various forms is really underpinning the market. In the APAC region alone, it has captured a third of the global air cargo market, the highest of any region worldwide.

“The booming e-commerce market has been a crucial factor in the recovery of the global airfreight industry during and post-pandemic,” Igor Kwiatkowski, Executive Manager of Qantas Freight, continued. 

“As consumer habits shifted towards online shopping, the demand for efficient air cargo services surged. This resurgence has not only contributed to increased airfreight volumes but also provided a pathway for operators to rebuild and adapt.”

The initial boom in PPE demand from the pandemic was replaced by general e-commerce, and that in turn was matched by general cargo growth as global economies have recovered.

“There have been changes in air cargo capacity: initially we lost almost all bellyhold capacity to be replaced by maindeck; then this capacity was gradually switched from PPE charters to provide resilience in major supply chains through programme charters, which has tended to continue even today; and now we have finally seen restoration of bellyhold capacity to pre-COVID levels on most routes, providing the frequency and choice that some commodities require, such as pharma,” Wilson Kwong, Chief Executive of Hactl, stated. 

“e-commerce favours airfreight, and shows no sign of abating as yet, so there is good reason to remain optimistic – subject to any exceptional factors not disrupting the trend.”

Challenges

The airfreight industry in the APAC region is confronted with several significant challenges that could disrupt operations. One primary concern is the ongoing economic uncertainty, which encompasses fluctuations in global demand, inflationary pressures, and exchange rate volatility; factors that could adversely impact export volumes and profitability. 

“Many of the world’s production powerhouses, including China, are located in the East, resulting in heavy air cargo traffic typically moving from East to West. However, carriers face challenges with cargo movements out of the West towards the East due to a directional imbalance,” Perera explained.

Additionally, capacity management poses a critical challenge; an oversupply of cargo space may result in reduced rates and heightened competition. 

Geopolitical tensions and trade disruptions, including conflicts, sanctions, and policy changes, further threaten key trade routes and supply chains. For example, due to the China-US trade tensions, dependency on Chinese manufacturing has decreased, shifting to hubs in Vietnam, India, and Mexico. 

“Global trade, e-commerce volumes, and the health of US and European economies are all important. But we must remain mindful of the fact that airfreight’s success is often the result of exceptional factors as mentioned above,” Kwong said. “These are unpredictable in themselves, so the only predictability is unpredictability! And we should welcome that.”

Moreover, the industry’s increasing emphasis on sustainability introduces its own set of challenges, as companies must navigate stricter environmental regulations while effectively managing costs.

“We are optimistic, at the same time cautious of how economic and geopolitical shifts may or may not impact this growth,” Anthony explained. 

Target areas

The APAC region offers several promising opportunities for growth in the airfreight industry. Singapore, in particular, holds significant potential as a strategic hub. Its advanced infrastructure, connectivity, and focus on innovation make it an ideal location for industries like pharmaceuticals, electronics, and semiconductors. The healthcare and pharmaceutical sectors also present significant potential, especially for temperature-sensitive shipments, as the demand for advanced healthcare solutions increases across the region.

“We see untapped growth opportunities for cargo on popular passenger lanes (but unpopular cargo lanes) across destinations such as Maldives, Bali and Phuket among others,” Anthony continued.

Geographically, emerging markets in Southeast Asia, particularly Vietnam, Thailand, Malaysia, and the Philippines, are seeing strong manufacturing growth, offering new trade lanes and export opportunities.

Sri Lanka’s strategic location between the East and the West, along with its highly connected port (ranked 24th globally), positions it as a vital hub for sea-air, air-air, and air-sea logistics. 

“This makes it a key player in the Silk Route and Belt and Road initiatives. Therefore, not limiting our partnerships to airlines, we see shipping lines, and road feeder networks as potential partners, essential for maintaining important trade connections,” Perera added.

Network developments

The outlook for global airfreight capacity in 2024 is cautiously optimistic. Factors such as ongoing e-commerce growth, international trade and potential disruptions in supply chains will play pivotal roles. 

Additionally, fluctuations in fuel prices, regulatory changes and advancements in logistics technology will also influence capacity dynamics as the industry continues to adapt and evolve. 

Amid that environment, carriers cannot limit themselves to their own networks. Products and brands are globalised, and demand can extend to the far corners of the world. 

“Simplistically, global trade displays long-term growth as populations grow, and this should logically be matched by underlying demand in logistics growth. Any other growth has more to do with modal shift, which has benefited airfreight several times in recent years,” Kwong said.

“SriLankan Cargo has established direct operations covering Europe, the Middle East, South Asia, Southeast Asia, the Far East, China, and Australia. To enhance our services and provide better solutions for our customers, SriLankan Cargo utilises its interline partners and road feeder network.,” Perera outlined. 

“Our partnerships include over 130 Special Prorated Agreements (SPAs) and six road feeder services. This has enabled us to reach the far corners of the globe, while Road Feeder Services (RFS) extend our ground reach in Europe, Australia, China, and India, where larger land masses need to be covered.”

Air transport providers must be able to offer comprehensive solutions to meet these demands; otherwise, they risk becoming insignificant. Therefore, they must strive to be competitive and leave no stone unturned in their efforts to succeed. 

“The key to building our connected network has been our partnerships and collaborations with local carriers, freight forwarders and logistics providers across the region. Also leveraging the significant and growing passenger network across Qantas and Jetstar, which gives us access to key markets around the region,” Kwiatkowski stated.