The second topic for the round table discussion was the new rash of new aircraft orders, and whether these wouldlead to overcapacity in air cargo.
Michael Steen, senior vice president and chief marketing offi cer for Atlas Air insisted the new aircraft orders would not drive overcapacity. “Some markets might experience overcapacity, but over time there will be key drivers thatdemand more capacity,” he said.
Asked if Polar Air Cargo, a subsidiary of Atlas Air, was not reducing frequencies to China, Steen said this was just part of the normal adjustment of capacity to market demand: “Airlines always act too late – they add capacity when the market is peaking and we can see this now in India, Japan, China and Korea. But this is just the usual cycle of supplyand demand,” he said.
Looking at the Indian market, Jay Shelat, vice president cargo at Jet Airways said there was a concern that demand was somehow outstripping supply, but he took comfort from the Boeing and McKinsey forecasts, which showed that long term growth trends would remain strong, thus soaking up any excess capacityin due course.
Kelvin Leung, chairman of HAFFA, the Hong Kong Air Freight Forwarders Association, also thought the current situation was nothing more than the usual fl uctuation in supply and demand. Asked why air cargo growth out of Asia had levelled off in the fi rst half of the year, the panel remained phlegmatic. Steen said it was because the world economy had not been at the level expected and because supply chain managers were becoming more and more sophisticated about using sea freight. Inventory levels in the US had also been reduced. But all these weretemporary effects, he reckoned.
Leung agreed with this analysis, pointing to lower spending by US consumers.“But we can’t expect to see double digitgrowth all the time – it is not normal,”he said.
Boots said there was some modal shift, but says TNT had seen this coming for a long time and had been adapting to it by offering bigger clients all three modes. Steen reckoned that the shift from air to sea for some goods was a genuine long term trend, but pointed out that sea freight faced infrastructure problems too. “If we look at the customers we lease aircraft to they have seensteady growth,” he said
From a forwarder’s perspective Leung said that a customer would always use sea freight in preference to air if they could for simple price reasons, and he added that with transpacifi c sailing times of 11 days and less port congestion, itwas getting more attractive.
Intervening from the fl oor, Sarosh Nagarvala, treasurer of FIATA, suggested that the reason sea freight was winning traffi c from air was because it had done a lot to improve its service in recent years.“What have airlines done to enhance thevalue of air freight?” he asked. “Containerisationintroduced door to doorshipments for sea freight decades ago,while in air freight, handling and otherground activities still take up the biggestportion of the journey time.”