Jun 2019

The "holiday business": airfreight's biggest customer

All over the world, there are special events every year to which we all look forward: Christmas, Thanksgiving, Chinese New Year, Easter, Valentine’s Day, Mother’s Day, Father’s Day and International Women’s Day, to name just a few.

In addition to their (sometimes) original spiritual or religious significance, these occasions generally involve giving gifts and flowers to those we love – usually accompanied by the obligatory greeting card. They also often result in get-togethers with family and friends – for which we frequently dress up, and lay in huge stocks of special food and drink.

With so much of the world’s manufactured goods originating in China, and as Chinese consumers themselves enjoy the fruits of their labours in the form of their developing taste for goods and produce from other countries, it’s little wonder that these events create huge demand for airfreight through Hong Kong – China’s gateway to the world. The “Holiday Business” is big business.

The festival itself drives a sharp increase in volumes of commodities such as fruit and seafood, and consumer goods like clothing, as Chinese people prepare to celebrate together in style.

The New Year effect

Each event has its own unique format, and its own particular impact on the air cargo business. In terms of disruption to normal activity, Chinese New Year stands head-and-shoulders above the rest. The festival itself drives a sharp increase in volumes of commodities such as fruit and seafood, and consumer goods like clothing, as Chinese people prepare to celebrate together in style.

But the world outside China also rushes to order manufactured goods before the Chinese factories shut down for anything up to 14 days, in order to prevent supply chain disruption and stock shortages. Freight forwarders and truckers deliver shipments further in advance than normal, and they collect shipments after the long holiday, adding extreme pressure on the limited storage capacity of airport cargo terminals (which are, of course, primarily designed as transit facilities).

To add a further complication, Chinese New Year “floats” between late January and mid-February due to its connection to the Chinese (not Gregorian) calendar. This makes year-on-year comparisons of airfreight tonnages somewhat futile during the first three months of every year, since the pre-holiday boom is inevitably followed by a lull of up to two weeks during the ensuing holiday period when cargo levels can reduce to 30-40% of normal; and these rises and falls never occur in the same month two years running.

Most of the Chinese world shuts down for anything from one to fourteen days during the Chinese New Year period. Airline VFR (visiting friends and relatives) traffic soars as Chinese people traditionally rush home huge distances to spend this special time with their families. Increasingly Chinese middle classes take long overseas vacations. But Hactl carries on working 24/7. That said, Hactl naturally ensures that its own staff also have the opportunity to be with family and friends during Chinese New Year; this means every staff member receiving at least one day off during the first three days of the holiday.

Consumers around the world increasingly order their Christmas presents online.

Christmas, of course, is still regarded as airfreight’s biggest global customer. It’s almost impossible to quantify exactly how much airfreight traffic this one-day event generates every year; but a look at Q4 figures, fuelled by heavy global ordering ready for the Christmas sales period, gives some idea: typically, at Hactl, tonnages are 15% above the average for the rest of the year. And it’s no longer just bulk shipments of higher-price commodities such as perfume and luxury goods these days: consumers around the world increasingly order their Christmas presents online.

Cut flowers growth drives higher standards

Flower-giving occasions such as Valentine’s Day, Mother’s Day and International Women’s Day add volume and complexity to everyday airfreight operations the world over. Increasingly, the fresh flowers which are given originate from East Africa and South America – sometimes direct, but also often via the world’s largest flower auction, located in Holland. According to Seabury Consulting,

Valentine’s Day is actually not a single day for airfreight, but a three-week ramp-up during which freighter operators virtually double their capacity from major origin points such as Bogota, Quito and Nairobi; and Mother’s Day ranks a close second. Seabury Consulting plotted an increase in charter capacity from Bogota to a peak of around 10,000 tonnes in February 2019; while one carrier reported flying over 9,000 tonnes of flowers from South America, and increased its cargo frequencies from 22 to 54 during the busiest week (Hong Kong was incidentally one of its top markets). Another airline carried over 4,000 tonnes of flowers for Valentine’s Day.

These cut flowers all need to maintain constant temperatures throughout their journey, to preserve “vase life” and value. That’s why Hactl invested in a dedicated Perishable Cargo Handling Centre and additional equipment such as thermal dollies, creating its own “Fresh Lane”, and was recently the first cargo handling agent to undergo certification for IATA’s new CEIV Fresh standard.

One carrier reported flying over 9,000 tonnes of flowers from South America.

The Friday after Thanksgiving 2018 was the first day when over US$2 billion was spent on smartphones, among the 33.5 percent of e-commerce sales stemming from mobile devices.

Online shopping events unleash consumer spending

Then, there are the new consumer events that have joined the annual calendar: Black Friday and Singles Day. While these are often about treating oneself, rather than others, they still entail huge volumes of goods travelling by airfreight.

“Black Friday” is the name now given to the Friday following Thanksgiving Day in the USA. Since the 1950s, it has also been regarded as the first day of the Christmas shopping season. Many stores kick off this prime shopping period with substantial discounts, and what is for many a four-day holiday results in consumers enthusiastically reaching for their wallets.

CNBC quotes Adobe Analytics (which tracks transactions for 80 of the top 100 internet retailers in the U.S. like Walmart and Amazon) reports that Black Friday 2018 brought in a record US$6.22 billion in U.S. online sales, up 23.6 percent from a year earlier. And, Adobe also reported, the Friday after Thanksgiving 2018 was the first day when over US$2 billion was spent on smartphones, among the 33.5 percent of e-commerce sales stemming from mobile devices. This is for the USA alone: many other major markets such as the UK have also followed this retail phenomenon.

Meanwhile, back in China itself, what began as a reaction against Valentine’s Day by proud singles, has become the world’s number one online shopping event. “Singles Day” (or Guanggun Jie: literally “Single Sticks” Holiday) now takes place every November 11th: a date chosen because the number “1” resembles an individual who is alone. Alibaba’s tenth Singles Day event in 2018 once again set a 24-hour sales record, according to Practical Ecommerce magazine. The Chinese e-commerce giant reported sales of US$30.8 billion for the 24-hour period, up 27 percent on 2017. Once again, airfreight plays a major part in deliveries. Much of this additional traffic arrives at Hactl as small packages in mailbags, creating a handling challenge for added-value logistics subsidiary Hacis, which nowadays receives huge volumes of mailbags from mainland China, and loads them into containers. These mail sacks often contain delicate commodities, requiring handling with great speed, but also extreme care.

Cargo volumes rise sharply before events like Chinese New Year and Christmas, and often this...adds to pressure on manpower allocation.

How air cargo copes with the peaks

Due to the spare cargo capacity on passenger flights from Hong Kong throughout the year, and the eternal necessity to operate scheduled freighter flights profitably on both outbound and inbound legs, all these events and festivals don’t necessarily lead to a proportionate increase in freighter flights – although there are certainly more ad hoc charters and supplemental wet-leases during peak times, sometimes contracted by carriers or even by larger freight forwarders.

What these events do mean is a great deal more cargo to be handled through SuperTerminal 1 on every shift, and a substantial addition to the number of pallets and ULDs which Hactl builds up from loose cargo. Says General Manager – Service Delivery, Paul Cheng: “Cargo volumes rise sharply before events like Chinese New Year and Christmas, and often this involves a large proportion of perishables which require speedy handling; this adds to pressure on manpower allocation.

“We maintain sufficient manpower year-round to deal with normal traffic levels, and when the busy times come we increase shift working to cope with the extra workload.” Hactl’s proud boast is being the only handler in Hong Kong that does not rely upon temporary agency labour, even to deal with such peaks in workloads.

So – next time you’re sitting with your family and friends, opening presents, enjoying great company and tucking into a feast fit for a king; or enjoying a romantic evening with the light of your life; or just treating yourself to an online sales bargain; remember the part airfreight played... and how Hong Kong and the hard-working Hactl team may well have helped deliver the goods for your special occasion.