Global airfreight market sees sluggish growth begin in 2013
The airfreight market has been limping along for the past couple of years due to slowing global trade and the shift of some commodities to sea transport. Based on International Air Transport Association figures, the airfreight market contracted 1.5 percent in 2012 and 0.7 percent in 2011. Although airfreight capacity was reduced throughout 2012, the decline in volume was greater, which led to a slight decline in load factors for the year.
However, not all was gloomy in 2012. Middle Eastern and African airlines noted cargo growth of 14.7 percent and 7.1 percent, respectively. This growth was attributed to shifting trade lanes favoring Africa and Asia, particularly China, which was in search for alternative trade partners as its largest partners, Europe and the U.S., were experiencing sluggish economic growth.
Bright spots are now appearing as the European and the U.S. economies strengthen. Recent IATA data shows that global freight tonne kilometers (FTKs) have slowly been increasing since the beginning of the second quarter of 2013. Surprisingly, it is not the Asia-Pacific airlines that are leading this improvement. Instead, it is European and Middle Eastern airlines that have been carrying the majority of the increase in air cargo volumes.
Still, Europe’s largest cargo airline, Cargolux, reported a 3.5 percent decline in tonnage for the first half of 2013, but its cargo load factor improved from 69.1 percent for the first half of 2012 to 70 percent for the same period in 2013. To manage its capacity better, it is retiring two of its 18 MD-11 freighters and took delivery of its first Boeing 777F in October and its second one in November. It is also expanding its network with new routes to the U.S., Mexico, South America and China.
Meanwhile, Abu Dhabi’s Etihad Cargo noted a 23-percent increase in tonnage for the first half of the year as well as record months in July and September with tonnage increases of 37 percent and 42 percent, respectively. Strong demand from Hong Kong, China, India and Germany were noted.
Still, IATA cautions that a sustainable global recovery depends on the improvement of Asia-Pacific airlines, which make up about 38 percent of the global airfreight market. So far this year, this group of airlines have reported an almost 2-percent contraction in tonnage. The Association of Asia Pacific Airlines’ director general Andrew Herdman says the decline in airfreight demand this year is a result of “lackluster trade growth and relatively weak markets for electronic products and other high value goods normally shipped by air.” Still, Herdman notes there are signs that the slump in airfreight may be bottoming out, at least in volume terms, “but surplus cargo capacity will continue to exert downward pressure on rates.”
Asian airlines are cutting capacity, routes and diversifying commodities in attempts to return to profitability. For example, in 2012, Cathay Pacific carried 5.3 percent less cargo than it did in 2011 and as a result, total revenue declined 7.3 percent. The Asia-Europe market has particularly hurt Cathay Pacific. As of early 2013, the airline has cut freighter frequencies to Europe by 63 percent to 11 flights per week from 30 flights per week in 2008. It also plans to target high-value goods, perishables and pharmaceuticals to improve revenue and margins.
Meanwhile, U.S.-based FedEx announced plans to restructure its Express division. Like many other airfreight providers, FedEx Express has seen a shift from its premium products to its economy products. Comparing average daily volumes for each of the international express service offerings, it appears International Economy has steadily increased each quarter since the beginning of fiscal year 2012, with a slight dip in the third quarter. International Priority has remained fairly steady for the same comparable time period. International Domestic, on the other hand, has increased greatly since first quarter of fiscal year 2012, but a sharp drop in average daily volumes was noticeable on a quarter–to–quarter comparison from second quarter to third quarter of the present fiscal year. This drop may be due to declining demand within the domestic European market.
FedEx also has removed aircraft from its fleet, including A310s and MD10s. It is also accelerating the retirement of 66 further MD10 and A310s, although it has not given a timeline for this process.