While much of the focus has been on surging transpacific air cargo, Asia Pacific to Europe has performed better even if overall westbound volumes are still around 12% below January 2022 peak levels. Over the past years there have been significant changes in how air cargo moves between Asia and Europe with both the Gulf and Central Asia increasing their share of traffic. On the inbound side, airports in Belgium, Spain and Hungary have increased their share of traffic entering the European union. Some of these shifts are likely to be permanent and are creating opportunities for growth.
Asia to Europe Traffic Growth in Context
One of the key drivers behind the recent strong performance in global international air cargo has been an increase in cross border e-commerce traffic rather than a recovery in traditional manufacturing driven supply chain cargo. Overall international air cargo tonnes handled at Asia Pacific airports are up almost 14% for the first part of this year. However, this hides the fact that most growth has been in China (Jan-Jun +32%) and Hong Kong (Jan-Jul +24%), while other locations in Northeast Asia have not seen the same level of growth. European international air cargo has outperformed cargo growth in the Americas.
Monthly EU-27 inbound traffic from the Middle East and South Asia and the wider Asia Pacific region is approximately 280,000 tonnes per month (or about 3.36 million tonnes per annum). In the most recent months, volumes are at 88% of Jan 2022 peak levels. However, in the last 12 months volumes have grown by over 9%.
Inbound data from Asia to Europe shows a growing gap between air cargo traffic and air trade. Air trade statistics do not capture most small package traffic due to value reporting thresholds and a growing gap between air cargo traffic and air trade indicates higher shares of low value goods (i.e. cross border e-commerce). Until about 2021 air trade and air traffic moved in sync, but since then the ga has widened. Air imports from Asia Pacific, Middle East and South Asia are only about 90% of 2015 levels, while overall traffic is more than 20% higher.
Gulf and Central Asia Increasing Share of Traffic
About 48% of this traffic moves directly from Northeast Asia (36%), South Asia (7%) and Southeast Asia (5%) into Europe. The remainder comes via the Gulf (29%), Levant and Caucasus – primarily Turkey and Azerbaijan (15%) and Central Asia (8%)
Prior to the beginning of the Russia – Ukraine war, around 10-11% of traffic came via Russia, primarily on aircraft operated by Air Bridge Cargo. Regional market shares were quickly redistributed – primarily on to services via the Gulf and Central Asia. The increase of freight moving via Central Asia is partly due to the emergence of new home-based carriers, but primarily a consequence of the need for additional technical landings as a consequence of needing to avoid Russian airspace on routings between Asia and Europe.
Direct Northeast Asia traffic is at 90% of Jan 2022 peak levels, but direct China/HK to EU traffic grew by 37% in the last 12 months and is at an all time high. Overall traffic via the Gulf region is down 4% but that is driven by a 7% drop in traffic via the UAE and a 13% increase in tonnage via Qatar. Traffic via Turkey is up 18% and at an all-time high. This is driven by a strong expansion of the scale of Turkish Airline’s belly and freighter network.
The table below shows how the relative competitive advantage of enroute transit locations have changed as a consequence of Russian overflight no longer being available to European and non-Chinese carriers. On a Hong Kong to Europe routing, avoiding Russian airspace requires an extra hour of flying. The combination out of extra cost and a payload hit has a one-way profit impact of more than $40,000 compared to a direct routing utilising Russian airspace.
Changing Market Shares in Europe
Inbound traffic has seen a shift in market share between EU countries and airports.
- On the inbound side, Germany continues to be the dominant market, but its market share over the last 10 years has dropped from 39% to 34% of total traffic.
- Netherlands and France have seen their market share of inbound traffic drop from 17% to 14% and 14% to 12%, respectively.
- Belgium’s market share has grown from 6% to around 10%, primarily due to growth in Liege. However, Liege remains below peak traffic levels and market shares. Current traffic levels are about two thirds of 2022 peak levels and market share 3% points lower.
- Both Spain and Hungary have seen large increases in traffic and have increased their market share. In the case of Spain, the increase has been the largest with inbound share climbing from 2 to 7% over the last 10 years.
This trajectory matches the development of China to Europe trade in low value items. Low value exports from China into Europe grew by 41% in 2023 and year to date growth has been similar. Belgium, Spain and Hungary have seen the largest increase in volumes, growing 90% last year and over 70% sofar this year.
While some of these developments reflect the focus of Chinese platforms on secondary markets or ease of dealing with customs authorities, it is allowing airports to build up scale and entrench themselves as distribution points in their own right. This could well see the dominance of the main hubs – Frankfurt, Amsterdam and Paris decline.