Recent regional improvements in Asia, driven by the e-commerce platforms Shein and Temu, have resulted in a significant increase in air cargo demand. Compared to last year, Shein and Temu account for a 5% rise in cargo demand, fueling the growth of the air cargo industry. This surge in demand has benefited both airlines and manufacturers in the region, leading to substantial growth in exports. While the air cargo industry has faced challenges in 2023, particularly due to increased belly capacity in passenger aircraft, the growing e-commerce trend in Asia signifies a potential turnaround for the industry. Shein and Temu, with their focus on offering products at low prices, have become key players in the air cargo market. Their ability to pay for air cargo delivery speeds, coupled with their large customer base in the United States, has made air cargo an essential component of their operations. The impact of this growing e-commerce business is evident, with nearly 80% of cargo leaving Hong Kong attributable to the industry. This increased demand has also resulted in a notable boost in Asia’s air cargo performance, benefiting airlines operating dedicated cargo aircraft. While the longevity of this trend remains uncertain, the long-term market outlook for the region continues to show promising growth.
Regional Improvements in Asia
E-commerce driving air cargo demand
The air cargo industry in Asia has experienced a notable increase in demand, thanks to recent regional improvements driven by e-commerce. One of the key factors contributing to this growth is the rise of China-based e-commerce platforms Shein and Temu. These platforms have played a significant role in generating a 5% spike in cargo demand compared to the previous year. The growing demand for air cargo in Asia has not only benefited the airlines operating in the region but has also had a positive impact on manufacturers.
Shein and Temu contributing to cargo demand increase
Shein, a popular online fashion retailer, and Temu, an online marketplace, have emerged as major players in driving the demand for air cargo in Asia. Shein, reportedly preparing to go public, has recorded an impressive revenue of over $15.7 billion in 2021. On the other hand, Temu, which has been gaining popularity since its launch in the US, has generated $16 billion in revenue this year. However, the growth of these platforms has not been without controversy, as there have been legal disputes between Shein and Temu, with the latter accusing the former of “mafia-style intimidation of supplies.”
Comparison of cargo demand with last year
When compared to the same period last year, the cargo demand in Asia has shown a significant increase. Shein and Temu, with their low pricing strategy, have been able to attract a large customer base in the United States. To maintain affordable prices for their customers, these e-commerce platforms have relied heavily on air cargo to reduce shipment times. The ability to afford air cargo delivery speeds has allowed Shein and Temu to meet the growing demand and ensure customer satisfaction. The impact of this growing e-commerce business is evident, with nearly 80% of cargo leaving Hong Kong on certain days being a result of this industry.
Growth in exports benefiting airlines and manufacturers
The boom in air cargo demand in Asia has largely been driven by exports. In November, there was a notable 10% increase in air cargo moved in the Asia-Pacific region. This increase in demand has positively impacted cargo yields to various destinations, including North America, Europe, and the Middle East. The region’s airlines, especially those operating dedicated cargo aircraft, have been the primary beneficiaries of this growth in exports. Despite the challenges posed by the Covid-19 pandemic, Hong Kong’s Cathay Cargo recently surprised the industry by ordering 6 ultra-modern A350F aircraft, with the potential for 20 more. This order reflects the region’s long-term market outlook, which has continued to show growth and has also influenced major aircraft orders.
Overview of Shein and Temu
Shein’s revenue and plans to go public
Shein, the China-based online fashion retailer, has made a significant impact on the air cargo industry in Asia. The company’s revenue in 2021 exceeded $15.7 billion, making it a major player in the e-commerce sector. Shein has gained popularity for its low-priced products and is reportedly preparing to go public. This move indicates the company’s confidence in its continued success and its desire to expand its operations further.
Temu’s revenue and popularity in the US
Another significant contributor to the increase in air cargo demand in Asia is Temu, an online marketplace. Since its launch in the US market, Temu has gained popularity and has managed to generate $16 billion in revenue this year. The platform’s success can be attributed to its ability to offer products at extremely low prices, which has attracted a large customer base. Temu’s presence in the e-commerce sector has further fueled the demand for air cargo in the region.
Legal disputes between Shein and Temu
As Shein and Temu have gained prominence in the e-commerce industry, there have been legal disputes between the two companies. Temu recently filed a complaint in the US Federal Court in Washington DC, accusing Shein of “mafia-style intimidation of supplies.” These legal disputes highlight the competitive nature of the e-commerce market and the challenges faced by companies in maintaining their market share.
Comparison of revenue with Amazon
Despite their significant growth, it is essential to compare the revenue generated by Shein and Temu with that of e-commerce giant Amazon. In 2023, Amazon recorded a revenue of $143 billion, indicating its dominance in the industry. However, Shein and Temu’s impact on the air cargo industry cannot be underestimated, as they have successfully created a demand that necessitates the use of air cargo to meet customer expectations.
Price as a Key Factor
Shein and Temu’s low pricing strategy
One of the key factors behind the success of Shein and Temu is their low pricing strategy. Both companies have specialized in offering products at extremely affordable prices, which has attracted a large customer base. This strategy has allowed them to compete effectively in the e-commerce market and establish themselves as major players.
Air cargo necessary to reduce shipment times to the US
Due to the majority of their customers being located in the United States, Shein and Temu have had to find ways to reduce shipment times. Air cargo has become a crucial component in achieving this goal. By utilizing air cargo services, Shein and Temu have been able to ensure timely delivery of their products to their customers, thereby enhancing customer satisfaction.
Ability to afford air cargo delivery speeds
One might wonder how Shein and Temu are able to afford the premium associated with air cargo delivery speeds, considering their low pricing strategy. The answer lies in the sheer volume of business these e-commerce platforms generate. The significant revenue generated by Shein and Temu allows them to bear the costs associated with air cargo and maintain their affordability for customers.
Impact on cargo leaving Hong Kong
The impact of Shein and Temu’s business operations can be seen in the cargo leaving Hong Kong. Nearly 80% of cargo leaving the city on certain days is a result of the growing e-commerce business. This highlights the influence of Shein and Temu on the air cargo industry and the regional improvements in Asia.
Increase in Asia Air Cargo
10% increase in air cargo moved in Asia-Pacific
The demand for air cargo in the Asia-Pacific region has witnessed a noticeable increase, with a recorded 10% growth in cargo moved. This growth can be attributed to various factors, including the rise of e-commerce platforms like Shein and Temu. The increase in air cargo volume reflects the region’s economic growth and the importance of air transportation for the movement of goods.
Exports driving the boom in air cargo
The boom in air cargo demand in Asia has been primarily driven by exports. With cargo yields increasing by 4% to North America, 5% to Europe, and 4% to the Middle East, it is clear that the region’s exporters have played a crucial role in this growth. The ability of Asian manufacturers to meet the demand of international markets has created a positive impact on the air cargo industry.
Cargo yields to North America, Europe, and Middle East
The increase in air cargo demand in Asia has resulted in improved cargo yields to various regions, including North America, Europe, and the Middle East. This demonstrates the growing global demand for Asian products and the reliance on air cargo services for their transportation. The strengthened cargo yields highlight the importance of the air cargo industry in facilitating international trade.
Benefits for airlines with dedicated cargo aircraft
As the demand for air cargo increases in Asia, airlines operating dedicated cargo aircraft have reaped significant benefits. These airlines have been able to capitalize on the growing demand, which has led to increased revenues and improved performance. The success of these airlines emphasizes the importance of dedicated cargo aircraft in meeting the needs of the air cargo industry.
Long-Term Market Outlook
Uncertainty about the duration of the air cargo traffic increase
While the current increase in air cargo traffic in Asia is promising, there is still uncertainty about its duration. As the global economy continues to recover from the effects of the Covid-19 pandemic, it is difficult to predict the long-term trends in air cargo demand. However, the recent regional improvements in Asia driven by e-commerce indicate potential growth in the market.
Growth in the region’s long-term market outlook
Despite the uncertainty surrounding the duration of the air cargo traffic increase, the long-term market outlook for Asia remains positive. The region’s economic growth and the rise of e-commerce platforms like Shein and Temu indicate a potential for sustained growth in the air cargo industry. This growth is likely to be driven by the increasing export volume and the demand for Asian products in international markets.
Impact on major aircraft orders
The regional improvements in Asia and the growing air cargo demand have had a significant impact on major aircraft orders. Airlines and cargo operators in the region have recognized the need to invest in modern and efficient aircraft to meet the growing demand. One notable example is Cathay Cargo’s order of 6 A350F aircraft, with the option for 20 more. This order reflects the industry’s confidence in the long-term market outlook and the importance of having the right aircraft to meet customer needs.
Cathay Cargo’s order of A350F aircraft
Cathay Cargo’s recent order of A350F aircraft has brought attention to the airline’s commitment to expanding its cargo operations. With deliveries expected in 2027, Cathay Cargo aims to capitalize on the growing air cargo demand in the region. This order demonstrates the airline’s confidence in the long-term market outlook and its determination to remain competitive in the air cargo industry.
Increase in Capacity
Delivery of one-third of factory-new freighters to Asia
The increase in air cargo demand in Asia has resulted in a corresponding increase in capacity. According to Boeing’s report of orders and deliveries, nearly one-third of all factory-new freighters produced in 2023 have been delivered to operators in Asia. This indicates the region’s commitment to expanding its air cargo capabilities and meeting the growing demand.
Examples of new freighters received by Air China and China Airlines
The increase in capacity in Asia is evident through the delivery of new freighters to airlines in the region. Air China and China Airlines are among the carriers that have received new freighters, including the new 777 freighters. These additions to their fleets have allowed these airlines to enhance their air cargo capabilities and meet the growing demand.
Boeing’s report of orders and deliveries
Boeing’s report of orders and deliveries provides further evidence of the increase in capacity in Asia. The delivery of a significant number of new freighters to operators in the region indicates the industry’s commitment to meeting the growing air cargo demand. This increase in capacity is crucial in ensuring the efficient transportation of goods and supporting the region’s economic growth.
Conclusion
The growing demand for air cargo in Asia, driven by e-commerce platforms like Shein and Temu, has led to regional improvements and increased export volumes. The low pricing strategy adopted by these platforms has contributed to their success and created a demand that necessitates the use of air cargo. The impact of this demand is evident in the cargo leaving Hong Kong and the growing performance of the region’s airlines. While uncertainties remain about the duration of this air cargo traffic increase, the long-term market outlook for Asia remains positive. The region’s commitment to expanding capacity through the delivery of new freighters and major aircraft orders reflects the industry’s confidence in sustained growth. Overall, the regional improvements in Asia and the growing demand for air cargo signify the significance of the region in the global air cargo industry.