Asia air cargo market gets e-commerce boost as US-China trade war yet to bite

Large Asian cargo carriers including Cathay Pacific Airways rely on freight for around a quarter of revenue. (AFP)
Updated 19 October 2018
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Asia air cargo market gets e-commerce boost as US-China trade war yet to bite

  • E-commerce is growing at pace in populous Asia, driven by Chinese behemoth Alibaba Group and rival JD.com
  • Boeing on Monday forecast air cargo traffic would double over the next 20 years
JEJU, South Korea: Strong e-commerce demand is fueling Asia’s air freight market, with the US-China trade war having minimal negative impact so far and in some cases even boosting shipments, industry executives said on Friday.
E-commerce is growing at pace in populous Asia, driven by Chinese behemoth Alibaba Group and rival JD.com, as well as others such as Japan’s Rakuten, sponsor of Spanish soccer giants FC Barcelona.
But the flow of goods has been threatened this year by the United States imposing import tariffs on billions of dollars worth of Chinese goods to redress what it regards as unfair trade relations — with China’s government responding in kind.
“I think right now we are probably going to see a pretty strong fourth quarter,” Randy Tinseth, Boeing Co’s vice president for commercial airplane marketing, said on the sidelines of an industry conference.
“The economy today has been very, very strong. Frankly in anticipation of this geopolitical situation I think people are just going out and moving (cargo) quickly.”
Asia-Pacific air cargo volume rose 4.8 percent in January-August, showed data from the Association of Asia Pacific Airlines (AAPA). That was lower than last year’s 9.8 percent but came off a higher comparison base at a time of record shipments, said AAPA Director-General Andrew Herdman.
“Given this short-term effect of scrambling to meet deadlines for tariff imposition and so on we are seeing pockets – lanes and channels – where demand is stronger than expected. For the next several months the cargo picture remains relatively robust. The question is what will the outlook for next year be.”
Asian airlines have an outsized role in air freight, accounting for nearly 40 percent of the global market as the region is a major manufacturing hub and e-commerce is growing.
“E-commerce is changing the way people are buying stuff, especially in countries such as Indonesia and the Philippines,” said Jean-Francois Laval, Airbus executive vice president, Asia sales. “It is coming from China, from Korea, it is coming from other parts of the region. You need a huge amount of cargo space.”
Boeing on Monday forecast air cargo traffic would double over the next 20 years, growing at an average rate of 4.2 percent a year.
To meet that demand, the aircraft manufacturer expects the world freighter fleet to expand over 70 percent to 3,260 planes. Around half of air cargo is carried in the bellies of passenger jets, with the remainder flown on dedicated freighters.
Some large Asian cargo carriers including Cathay Pacific Airways and Korean Air Lines rely on freight for around a quarter of revenue.
“Last year the cargo market was extremely hot. In 2018 it still grew. The trade tensions in the world will have some effects but we haven’t seen it yet. I see constraints coming in a very short time. However, we are preparing for it,” Korean Air President Walter Cho told reporters on Friday.
“Anything from the US to China and vice versa is going to be affected. We are looking at alternate markets to China and the US as well.”
Japan Airlines President Yuji Akasaka said the trade war had made no change to the cargo market to date and he only expected an impact if “extremes” occurred.
“If it does happen it may affect us in the future but as of right now we haven’t seen it and hope it will cool down and go back to normal,” he said through a translator.
In the short term, trade war impact has not been too visible because initial tariffs were on items not typically transported by air such as metals, AAPA’s Herdman said. That is starting to change, however, as duties apply to more goods.
“I heard one example ... Seafood from the US to China is subject to retaliatory tariffs, so demand in China is down. Guess what? Demand for Canadian seafood is doing just fine.”


Abu Dhabi aims to lure start-ups with investment in new technology hub

Updated 24 March 2019
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Abu Dhabi aims to lure start-ups with investment in new technology hub

  • The initiative will help Abu Dhabi reduce reliance on oil
  • Mubadala hopes to attract Chinese and Indian companies

ABU DHABI: Abu Dhabi will commit up to $272 million to support technology start-ups, it said on Sunday, in a dedicated hub as part of efforts to diversify its economy.

US tech giant Microsoft will be a strategic partner, providing technology and cloud services to the businesses that join the hub as the capital of the United Arab Emirates continues its push to reduce reliance on oil revenue.
Abu Dhabi derives about 50 percent of its real gross domestic product and about 90 percent of central government revenue from the hydrocarbon sector, according to ratings agency S&P.
The emirate launched a $13.6 billion stimulus fund, Ghadan 21, in September last year to accelerate economic growth. Ghadan means tomorrow in Arabic. The new initiative, named Hub 71, is linked to Ghadan will also involve the launch of a $136 million fund to invest in start-ups, said Ibrahim Ajami, head of Mubadala Ventures, the technology arm of Mubadala Investment Co.
The goal is to have 100 companies over the next three to five years, Ajami said. “The market opportunities in this region are immense,” he added.
Mubadala, with assets of $225 billion and a big investor in tech companies, will act as the driver of the hub, located in the emirate’s financial district.
Softbank will be active in the hub and support the expansion of companies in which it has invested, Ajami said, adding that Mubadala is also aiming to attract Chinese and Indian companies, among others.
Mubadala which has committed $15 billion to the Softbank Vision Fund, plans to launch a $400 million fund to invest in leading European technology companies.
Incentives mapped out by the government include housing, office space and health insurance as part of the $272 million commitment, Ajami said.
Abu Dhabi will also announce a new research and development initiative on Monday linked to the Ghadan 21 plan, according to an invitation sent to journalists.