Forwarders confront European slowdown
Positive straws in the wind in December saw business confidence begin to recover, and the trend has continued into 2012, with purchasing indices, corporate hiring and stock markets all turning favorable. Just how far the airfreight industry has to go to benefit from this more upbeat mood is clear from IATA’s disheartening cargo statistics for 2011.
As the International Air Transport Association pointed out in its year-end summary, measures to match capacity with demand by reducing the freighter fleet were offset by introduction of new twin-aisle passenger aircraft.
Global airfreight markets showed sequential month-over-month growth in November and December, confirming the view that international trade may be stabilizing. However, the situation for airlines in most markets continued to deteriorate. With freight capacity climbing 4.4 percent in December 2011 compared with December 2010, the freight load factor was just 46.1 percent for the month. For the year as a whole, the load factor shrank to 45.9 percent, down from 48.1 percent in 2010.
Tony Tyler, IATA director general, summarized 2011 as a year of contrasts. “Healthy passenger growth, primarily in the first half, was offset by a declining cargo market. Optimism in China contrasted with gloom in Europe.
“Ironically, the weak euro supported business travel demand. But Europe’s primarily
tax-and-restrict approach to aviation policy left the continent’s carriers with the weakest profitability among the industry’s major regions,” Tyler said in a statement. “Cautious improving business confidence is good news. But 2012 is still going to be a tough year.”
Forwarders purchasing space on the critical Asia-Europe trade lane are understood to be paying between 15-percent and 20-percent less than a year ago. Carriers that should be pricing the increasing cost of jet fuel and new European emissions trading legislation into their kilo rates are in no position to force the issue.
Jade Cargo’s grounding of its aircraft and the loss of Cargoitalia at the turn of the year may help correct some of the supply/demand imbalance, but there is no question that westbound business into Europe remains difficult. Consumer demand is muted and will likely stay that way until the Eurozone crisis moves nearer to a long-term resolution. This has resulted in a modal switch from air to ocean that Austrian forwarder Gebrüder Weiss believes could become permanent.
Damco, the logistics arm of the A.P. Møller-Maersk Group, says the slump in airfreight rates out of Asia over the last year reflects a marked decline from the main Chinese points of origin, Shanghai, Shenzhen and Hong Kong — one of the factors that led to Jade’s demise. Although the pain has not been shared equally across the region, China is still the factory to the world. Its export volumes are still huge, despite a shift of some production toward countries with lower labor costs, so it is still the pattern of Chinese trade that has the main impact on airfreight rates. Export markets such as Malaysia, Indonesia and Bangladesh are holding stable in terms of airfreight volumes to Europe, but this is primarily low-end garment business that represents a lower yield for carriers.
The state of the global economy can look very different depending entirely on where you’re sitting. “If you go shopping in Hong Kong on a Sunday afternoon, you would never believe there is a crisis,” says Tomas Sonntag, who is based there in his role of director, global airfreight procurement for the Air + Ocean segment of the Luxembourg-headquartered Logwin Group.