Jade Cargo folds amid Asian cargo slump
After grounding its fleet of six Boeing 747-400ERFs on December 31 due to depressed demand, Jade Cargo International has officially shut down. The liquidation of the Chinese carrier — of which Shenzhen Airlines, Lufthansa Cargo and German investment firm DEG hold a 51-percent, 25-percent and 24-percent stake, respectively — comes on the heels of numerous capacity cuts in the Asia-Pacific region.
In February, Jade Cargo announced a possible restructuring deal between its shareholders and the Shenzhen-based UniTop Group. Unfortunately, the deal fell though, a Lufthansa Cargo spokesman explained to Air Cargo World.
“Due to the ongoing weak demand for air cargo services to and from China, the restructuring of Jade Cargo could not be successfully concluded,” the spokesman said. “In view of the latest developments, the board of directors has decided to voluntarily dissolve the company subject to all required government approvals for this process. All efforts will be made to minimize the impact on stakeholders.”
More carriers are likely to follow Jade Cargo’s lead, industry insiders believe. In fact, Grandstar Air Cargo, the Tianjin-based carrier co-owned by Sinotrans Air Transportation Development Co. and Korean Air Cargo, has recently suspended operations after losing $53 million last year.
The slump in China’s appetite for airfreight is likely to blame for such cuts. A brief peak in March sparked hopes of growing demand, prompting airlines to jack up rates out of China by up to $0.94 per kilo, but prices bounced back down as soon as that momentum petered out. Since then, prices have continued to plumb new depths. Spot rating is rampant — below levels required for a sustainable freighter operation — remarked Gerhard Blumensaat, director of airfreight for central China at DB Schenker.
As a result of fierce pricing moves from airlines and an overall volatility in the market, forwarders have scaled down their volume commitments to carriers and have gone more and more for ad-hoc pricing. Shipper forecasts for demand two to three months down the road have largely dried up, and forecasts that did arise turned out to be wildly off the mark, one forwarder reported.
The engine of global growth is visibly stuttering. Not only has export growth from China slowed sharply, but imports have also lost momentum, as high inflation, notably rising food and fuel prices, is eroding the purchasing power of Chinese consumers. Airlines’ load factors out of Asia have dropped painfully. In April, the average international load factor of members of the Association of Asia Pacific Airlines fell 2 percentage points to 66.3 percent, despite a 4.8 percent reduction in capacity. In terms of freight tonne-kilometers, their cargo traffic was down 7.6 percent in April.