News / Air cargo shifts capacity to where the money is as holiday season begins

22/10/2024

Airlines are shifting capacity to Asia Pacific-North America as disruption from China’s forthcoming Golden Week holiday recedes, and the Christmas rush starts.

According to the US National Retail Federation (NRF), consumer spending for the holidays is expected to grow between 2.5% and 3.5% on last year, while ecommerce is expected to grow by 8% to 9%, to up to $297.9bn.

“The economy remains fundamentally healthy and continues to maintain its momentum heading into the final months of the year,” said NRF president and CEO Matthew Shay. “The winter holidays are an important tradition to American families, and their capacity to spend will continue to be supported by a strong job market and wage growth.”

NRF did note that there would be five fewer days between Thanksgiving and Christmas than last year, and that there could be an economic impact from the recent hurricanes.

But NRF chief economist Jack Kleinhenz added: “We remain optimistic about the pace of economic activity and growth projected in the second half of the year.“Household finances are in good shape and an impetus for strong spending heading into the holiday season.”

Airlines are certainly putting their capacity where the money is. Last week, capacity from Asia Pacific to North America rose 6% on the previous week, according to Rotate’s capacity database. To Europe, capacity was up 4%.

The biggest rises were seen out of Shanghai to North America, where capacity rose 17.5% week on week, and from Hong Kong to North America, capacity rose 11.7%.

Cathay Pacific’s chief customer and commercial officer, Lavinia Lau, said today: “We expect demand to be robust during the traditional peak season, driven by ecommerce, hi-tech and electronic goods from the Chinese mainland, South-east Asia and India, as well as perishables from the south-west Pacific and Americas.”

Cathay saw volumes up 11% in September, year on year, and up 10% year-to-date.

“We observed an uptick in our Cathay Fresh shipments from south-west Pacific, South-east Asia and North America into Hong Kong and the Chinese mainland, driven by increased demand during the mid-autumn festival,” explained Ms Lau. “There was also an increase in shipments through our Cathay Priority solution due to growing demand for time-sensitive shipments to the Americas and Europe. From the Greater Bay Area, ecommerce shipments continued to be the key driver of our export tonnage.”

The additional capacity did not put any pressure on rates, however. The TAC Index today indicated week-on-week rates out of Hong Kong had risen 1.6%, while out of Shanghai, rates rose 3.6%.

The NRF, meanwhile, warned last week that any new tariffs by the US would hit consumer spending. It noted that the Peterson Institute for International Economics and others found existing import tariffs cost an estimated $1,500-$3,000 per US household, but that would rise to an average of more than $4,000 under a second Trump administration.

Mr Shay added: “Tariffs are paid by the importer and not the producing country, and that is passed on to the consumer. It’s a tax paid by the consumer.

“Tariffs can be a useful temporary tool during trade negotiations, when used strategically and sparingly, to get benefits in a trade relationship.”