Make no mistake, 2017 will see air freight forwarding markets resurging, with much of the expansion likely due to heightened activity on lanes to and from Asia, according to a senior UPS executive.
      Big Brown’s Sebastian Chan, President of Global Freight Forwarding, UPS Asia Pacific Region, told FlyingTypers that after a difficult first three quarters of 2016 in international air freight markets, positive Q4 offered hope for long-term optimism.

Pick UPS

      “We are anticipating positive pick-up in air freight demand in 2017 with healthy growth in capacity, driven by several bright spots including e-commerce growth and demand for perishables and healthcare logistics,” he said. “E-commerce is continuing to drive growth in air, ocean, rail, ground, and express. As online retailers become bigger and more mature, UPS is able to support more complex supply chain models with our full portfolio of logistics services.”

Chow Down Perishables

      “We are also seeing a greater appetite for perishable goods and food products in Asia, which has become an important driver for global air freight growth in the past decade.”

Big Biz Gets Bigger

      Air freight constitutes a major chunk of UPS’s supply chain business as part of the integrator’s extensive portfolio of global freight forwarding solutions which covers air, ocean, ground, and rail services. However, although UPS’s Supply Chain and Freight division contributed $2.6bn in revenue in Q3, up 8.1 percent year-on-year, executives reported “soft” international air freight forwarding conditions.
      “Overall, global GDP forecasts were slightly down,” explained Chan. “We continued to see mixed economic signals across some industrial markets for the first three quarters of 2016. For example, air exports from Asia to the U.S. were seeing double-digit negative growth. Part of the reason is the higher base in volume set by last year’s supply chain disruptions as a result of the U.S. West Coast seaport congestion, but overall the market was weak for the first three quarters of the year.”

Asia To Europe A Poppin'

      “But there is indication of growth, with intra-Asia exports seeing low single-digit growth this year.
      “Asia to Europe also experienced positive growth at low double digits year-to-date August.
      Things are looking up and for Q4, we picked up from Asian exports, driven by end-of-year seasonality.”

Pax Surge Cuts Cargo Yields?

      Soaring passenger demand has seen large increases in bellyhold capacity on many lanes, hurting most carriers’ cargo yields and received rates with predictable, negative implications for forwarders.

Think Twice

      But according to Chan, UPS’s downturn in international air freight was primarily down to demand. “When you talk about increase of bellyhold capacity, it only means the capacity in the market was growing faster due to the increase in belly capacity, creating an imbalance of capacity and demand,” he said. “It is true that we have been seeing a general over-supply of capacity in the air freight market, however, this is not connected with the softening of the air freight demand.”

Going Forward

      Looking forward, he said Asia’s share of the global perishable market had grown from 23 percent in 2006 to 27 percent in 2015, driven by 6.8 percent annual import growth, and predicted this would drive freight demand in the future.
      “As Asia’s appetite for key imports such as fresh seafood, fresh fruits and vegetables, frozen foods, and flower and plants continue to evolve, we expect this to be a bright spot for air freight demand,” he said.
      Pharmaceuticals requiring cold-chain logistics services also presented opportunities for air freight demand.

The Pitch

      “UPS offers specialized services for healthcare and life science businesses, with over 100 healthcare-dedicated facilities globally and a portfolio that includes temperature-sensitive storage and transportation, 24-hour monitoring and security services,” Chan declared.

UPS Saves B747 Production Line

      UPS recently announced the acquisition of Marken, a global provider of supply chain solutions to the life sciences industry. This, said Chan, would further strengthen its healthcare portfolio and provide more delivery options, faster transit times, and earlier guaranteed deliveries for healthcare customers.
      “Our long-term strategy is to expand our presence in Asia, thus increasing our customers’ access to global markets, and we believe air cargo will play an important role in their supply chains and continue to be a growth opportunity for us,” he added.
      “That is why UPS recently ordered 14 new Boeing 747-8F cargo jets to meet increased demand in air capacity from our customers.”

Celebrates The Big Boeing

      “The new fleet purchase also demonstrates our confidence in UPS’s international trade growth. It provides UPS with greater flexibility in our air network, and the 747s will be deployed to UPS’s 12 strategic air hubs in the U.S., Asia, Europe, and Canada.”
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