IAG Cargo's better than expected peak fuelled by e-commerce

26 / 11 / 2016

IAG Cargo has reported a “better than expected” peak season with traffic from the Asia Pacific region leading the charge.

Speaking to Air Cargo News, IAG commercial director David Shepherd said that the improvements in demand were being fuelled by e-commerce growth.

“Peak season is probably going a little bit better than we expected to be. We have been very happy with the volumes out of most markets, but Asia Pacific has been particularly strong all the way round to the Indian continent.

“It generally gets strong around this time of year but we are very full. We are even seeing very high demand from Asia into Latin America as well, and that's heathy given the network structure we run.”

He added: “I guess the thing that is happening is year-on-year cross boarder e-commerce is growing at a fairly phenomenal rate.

“It is one of the few sectors of our industry that is really driving quite hard so I expect it to be about that.”

Product recalls in the automotive and electronic were also helping with demand.

Shepherd said the growth in demand was also being seen on the backhaul journey, from Europe to Asia, led by milk powder.

“The days that you had a strong imbalance on that trade lane are long gone and we are actually seeing strong demand for our capacity out of the UK.

“Of course now that Iberia is flying directly to Asia out of Madrid, we are seeing demand for that service too.”

The improvement in e-commerce fuelled express demand was also helping with revenues.

“At this time of the year you see two things happening,” he said. “One is you obviously get a tightening of load factors on certain lanes, which clearly helps the yield position.

“The other thing that happens this time of the year, whether it's growth in e-commerce because of things like cyber Monday, there is just a greater need for express shipments and clearly whenever premium product growth occurs you are going to have a fair wind when it comes to your yield position.”

Shepherd said that IAG’s Premia facility, which handles express shipments and is soon to be expanded, had recorded its busiest day for loose prioritised shipments during this year’s peak.

While markets connecting with Asia Pacific are improving during the peak, Shepherd said that North American demand was “relatively soft” as a result of the strong US dollar, which makes goods from the country more expensive.

With market-wide capacity growth on the transatlantic still strong, load factors and therefore yields were also under pressure.

Looking ahead to 2017, Shepherd said IAG Cargo was expecting “reasonable growth”, although he added the company didn’t spend too much time trying to predict the market because the market is too unpredictable.

However, he did expect continued growth in the pharmaceutical market to continue as more generics are produced in Latin America and India.

“At a macro level it is difficult for us to influence the demand cycle of the market place. With so much political turmoil in the world today it's hard for anyone to figure out what that is going to look like,” Shepherd said.

“All we can do is shape our own business and put ourselves in a position where we are best placed to offer the customer what they require.”

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