Atlas Air maintains solid position in Asia
While market conditions indicate a softening air cargo demand, business for Atlas Air World Holdings, between Asia and North America has been exceptionally strong in 2010 and despite potential weakening of the market next year the ACMI operator is fully confident of the tradelane's future. By Karen E. Thuermer.
November 1, 2010
The continuing strong market is attributed by Atlas’ senior vice president and chief commercial officer, Michael T. Steen, to the fact that manufacturers and retailers in most industry segments had to restock inventories that became depleted during the first two quarters of this year. Steen explains that given the depletion of inventories in 2009, demand for air freight services and products increased almost immediately for air freight products normally not conducive for air freight. Some of that continues to be sustained today because manufacturers have recognised the value of using more air freight. “While air freight costs considerably more than ocean freight, customers realise the advantages when they compare the costs of carrying inventory,” Steen says. “They are able to sell their goods at a higher price point, which translates into higher profits.” Consequently, sheer demand for air freight in this trade lane has picked up considerably overall this year. “In fact, we saw cargo demand levels exceed the previous peak the industry experienced in the full year of 2008,” although he adds that he does not expect volumes next year to be as strong as they were in the first half of 2010.
A disciplined approach After the global recession hit in 4th Quarter 2008, markets experienced a free fall. In response, air carriers removed much of their capacity from the marketplace to save costs. But, Atlas Air maintained discipline around its fleet and a balance sheet to preserve its growth plan. “This helped us improve load factors and yields over the transpacific,” Steen reveals. Now the market appears to be softening again partly due to national mediation between China and Korea. “There is also an issue with manufacturing in China where manufacturers are in short supply of components and materials to produce high tech equipment such as smart phones,” he adds. While North America to Asia trade flows have been historically imbalanced, Steen adds that he has also seen demand pick up on this trade lane as the result of higher demand for North American goods. This includes shipments to China of capital equipment for use in manufacturing and higher end products desired by Asian consumers. “This is good news for air carriers that have always face imbalances in the North America-Asian trade lanes,” he says. World’s largest B747F fleet Atlas benefits from its strong position in the US-Asia markets, something Steen attributes to the fact Atlas Air offers the world’s largest fleet of Boeing 747-400 freighters – 22 in total, as well as six Boeing 747-200s. This gives Atlas a total fleet of 28 B747-F aircraft. Overall, Atlas Air’s fleet of B747 freighters represents roughly 10 per cent of the heavy freighters operating in the world today. This is important given that Atlas Air executives expect Asian markets to continue to lead global growth and underscore the value of the B747 freighter asset, especially since 80 per cent of airfreight from Asia is carried on maindeck freighters. “The Boeing 747-400 is the most capable and efficient long haul freighter in the world today,” Steen adds. Last year Atlas operated in 110 countries with over 15,000 flights, serving some 300 destinations. “This means we had a high utilisation of our aircraft,” Steen points out. In addition, the com-pany has 12 Boeing 747-8Fs on order, with options for 14 aircraft. According to corporate executives, Atlas Air is the only ACMI provider that offers the game-changing performance and efficiency of Boeing’s new 747-8 freighter. Not only is the 747-8F expected to deliver market-leading performance, they say, it should provide 16 per cent lower cash operating cost per tonne mile than the B747-400F. “Asia Pacific, in particular, will be a target market for these aircraft,” Steen says.