New gadgets — golden ticket for Asian carriers

Apple Inc’s new iPhones and Samsung Electronics Co’s Galaxy Gear watches are the gadgets that Asian freight airlines have been waiting for.

Asian carriers, suffering from a traffic slump of six consecutive months, may be able to break the losing streak with the help of new devices. Samsung just unveiled its Galaxy Gear and Note 3 tablet and Apple plans to show its new iPhones next week, meaning a rush to deliver product from factories in Asia ahead of the Christmas shopping season.

As China’s growth cools, cargo carriers will need US and European consumers to scoop up these new models as transporting electronics is their biggest business. Six of the world’s 10 largest freight airlines are in Asia, so a revival eases earnings pressure at companies such as Korean Air Lines Co, which moves Samsung’s phones, and Hong Kong-based Cathay Pacific Airways.

“The market needs revolutionary products to generate constant demand,” said Park Eunkyung, a Samsung Securities Co analyst in Seoul. “Whenever a new device is introduced, there’s always an increase in shipments for about 15 days to a month.”

Asian cargo shipments have dropped every month starting February, declining 1.4 per cent in July, according to the International Air Transport Association. Global shipments rose 1.2 per cent, helped by a 14 per cent surge in the Middle East.

Apple, Samsung

Korean Air, Asia’s biggest freight carrier, moved 2.1 per cent less cargo in the second quarter. Cathay, the region’s No. 2, posted six straight months of decline to July. Shares of Cathay rose 3.3 per cent in Hong Kong trading, the biggest since April 8, to HK$13.82. That trimmed the year-to- date loss to 2.8 per cent.

Freight carriers from United Parcel Service Inc to DHL Worldwide Express get traffic moving finished goods and components that go into making them. Demand for gadgets is typically strong immediately after introduction, and companies rush to new markets using planes. Moving high-value goods such as smartphones and tablets by ships delays efforts to capture market share quickly.

“We want Apple and Samsung to introduce new products more frequently,” said Zhu Zhiyong, general manager of sales and marketing, at Yangtze River Express Airlines Co. The company has moved every major iPhone and iPad model using its Boeing Co. 747 jumbos to the US from Chengdu and Chongqing in China.

“New products will give carriers bargaining power on pricing, especially in September, right before the peak Christmas season,” Zhu said.

With components such as memory chips to cameras coming from different locations, air delivery is essential to cut lags. The iPhone, designed in California, has parts made in South Korea by Samsung, and in Japan by Sony Corp. They all need to reach assembly lines in China for production to carry on smoothly. Combined, that logistics chain is key to generating traffic for cargo airlines.

“Manufacturers require just-in-time delivery, so they rely on air freighters, and don’t mind paying more for moving these goods by quality airlines,” said Eric Lin, a Hong Kong-based analyst at UBS Securities Asia.

Cathay last month reported its smallest profit in at least 15 years as cargo revenue dropped. High-tech product shipments account for more than half its freight volume, said Kelvin Lau, a Hong Kong-based analyst at Daiwa Securities Group.