Domestic airfreight industry hits turbulence
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The country’s airfreight services industry will likely flat line this year amid the domestic economic slowdown, which has affected exports and imports, an industry group has said.
The International Air Transport Association (IATA) released data recently saying that the global airfreight market remains slow with respect to air cargo demand in June.
“The mid-year report for air cargo is not encouraging. With growth of just 1.2 percent compared to June of last year, markets are basically stagnating. But overall it has been a disappointing first half of 2015, especially considering the strong finish to 2014,” IATA’s director general and CEO Tony Tyler said in a statement.
“The remainder of the year holds mixed signals. The general expectation is for an acceleration of economic growth, but business confidence and export orders look weak. Air cargo and the global economy will all benefit if governments can successfully focus on stabilizing growth and stimulating trade by removing barriers,” he said.
According to the report, Asia-Pacific carriers saw a drop in freight ton kilometers (FTKs), which measures actual freight traffic, of 0.3 percent in June from a year earlier. The region has experienced a notable slowdown in imports and exports over recent months, and the latest data shows trade in emerging Asian markets down 8 percent.
In line with global and regional airfreight performance, during the first half of this year, national-flag carrier Garuda Indonesia’s cargo volume decreased to 176,000 tons from 193,500 tons in the same period last year, as stated in the company’s financial report.
Garuda’s president director Arif Wibowo said that 60 percent of the cargo revenues were derived from the domestic market, while the remaining 40 percent came from the international market, mainly in China, South Korea and Japan.
Garuda Indonesia Cargo currently operates around 70 cargo service centers across the archipelago, including in Medan, Jambi, Jakarta, Bandung, Yogyakarta, Surakarta, Semarang, Surabaya and Denpasar.
“With growth of just 1.2 percent compared to June of last year, markets are basically stagnating.”
The carrier’s acting vice president for communications Ikhsan Rosan said that it aimed at pushing for more cooperation with other air cargo operators and increasing international services to improve the performance in the second quarter.
Meanwhile cargo airline Cardig Air CEO Boyke Soebroto said that he was pessimistic that the company would be able to reach the target cargo volume of up to 10,000 tons this year.
“The government recently announced that economic growth in the first semester reached only 4.7 percent and they will push it to 5 percent in the second semester, I believe that the demand for air cargo will remain stagnate until the end of the year and it is highly unlikely to reach our target,” he said.
The carrier transported a total of 6,000 tons of cargo with a value of around Rp 20 billion (US$1.5 million) last year, according to Boyke.
Data from the Central Statistics Agency (BPS) shows that the country’s exports declined 11.86 percent to US$78.29 billion during the first six months of this year. From January to June, overall imports declined 17.81 percent to $73.94 billion.
AirAsia Indonesia’s revenue and business head Rifai Taberi separately said that the carrier, which is the Indonesian affiliate of Malaysia’s AirAsia, also saw decreasing demand for air cargo with a 17 percent decrease in volume in the first semester of 2015 as compared to the same period in 2014.
Without mentioning the volume, Rifai said that the steep decrease was seen in the domestic routes, particularly in Java.
“Apart from the current economic slowdown, the improvement in land and railway transportation has highly affected the air cargo demand in Java as we see up to a 25 percent decrease in volume for the Jakarta-Surabaya route in the first semester,” Rifai
Rifai said that the air cargo service could not outcompete the land and railway transportation in terms of costs, since air cargo require more cost components such as x-ray procedures and warehouses.
Questions & Answers
Q.What are the main reasons for the domestic airfreight industry's current stagnation?
What are the main reasons for the domestic airfreight industry's current stagnation?
The industry's stagnation is primarily due to the domestic economic slowdown, which has negatively impacted both exports and imports. Improvement in land and railway transportation, particularly on domestic routes like Jakarta-Surabaya, has also affected air cargo demand.
Q.How has Garuda Indonesia's cargo volume been affected by the market downturn?
How has Garuda Indonesia's cargo volume been affected by the market downturn?
Garuda Indonesia's cargo volume decreased from 193,500 tons last year to 176,000 tons in the first half of this year. Sixty percent of its cargo revenue comes from the domestic market, with the remaining 40 percent from international markets.
Q.Why is AirAsia Indonesia seeing a steep decline in domestic air cargo volume?
Why is AirAsia Indonesia seeing a steep decline in domestic air cargo volume?
AirAsia Indonesia's domestic air cargo volume, especially on Java routes, has significantly decreased. This is due to the economic slowdown and increased competition from improved, more cost-effective land and railway transportation, which do not incur air cargo's additional costs.
Q.What is the industry's outlook for the remainder of the year?
What is the industry's outlook for the remainder of the year?
The outlook is mixed, with expectations of continued stagnation in demand for air cargo. Despite a projected acceleration of economic growth, weak business confidence and export orders suggest challenges will persist until the year's end.
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