We reported extensively at the end of 2013 on the problems facing the air cargo industry during 2014 and the positive signals being given due to the passable results achieved in the last quarter of that year. Time then maybe, for a short first “crystal ball glaze.”
The market is in a “semi-bouncy mood“ and admittedly, cargo flows and industrial trends tend to push us all into seeing this (Chinese) year “of the horse” as being a good race and one we can
And, why not be positive! The cargo industry deserves a bit of good news coupled with a small kick in the rear end!
2013 results, although not all on hand, will probably show a +2% or so over the year before. Not great, but considering all of the problems still on hand during 2013, not bad either.
Where will the growth come from in 2014?
If the market were to show an “additional” 2% growth for this year, then that would be a further step up the ladder.
But where will it come from and which areas will continue to fall by the wayside?
We should not be deluded into thinking that the 2014 growth was and “overall growth.”
No! - Most of it still originated through the Middle East and their ever expanding carriers and also happened only as from the second half of the year.
It’s almost perverse to see that despite an increase in world trade that carriers are still not in a position to adjust their airfreight rates alongside this. The massive increase in long haul capacity, due to strong passenger demand, brings much more “belly space” to the market and keeps yields far too low.
Still! - one would think that this would be offset by declining all freighter fleets. This is however, not the case.
It’s our view that only three regions will be in a position to keep this small but steady growth upright.
Namely, Middle East, Latin America and Africa. The latter however has still many problems to overcome.
Why these three and not the traditional Asian, European and North American markets?
The Middle East still shows fleets of the main carriers growing further during the next 5-10 years. This capacity has to be, and will be filled. Sometimes for the benefit of local markets, but more often than not, at a cost for European, Asian and U.S carriers. On top of this, cities such as Dubai, Doha and Abu Dhabi have done a good job in building up their respective hubs into “fast transfer areas.” Their traffic figures increases are double-digit - but we assume their rate increases are not!
Latin America, a very important cargo market for Spanish speaking countries, remains small compared to its northern neighbor and Asia. However, “small but good” is the motto. Rates are not so much under pressure and flows in 2013 and first weeks of 2014 are somewhat above the “magic 2%.”
Africa, a region where the Chinese government has been quietly but surely investing large amounts in order to capitalize on this future market as well as its natural resources. One might think that Europe has definitely missed the boat here. Despite declines, 2013 showed an almost 2% increase and carriers such as Ethiopian and Kenya Airways continue their cargo fleet expansion and joint ventures with their smaller neighbors.
The trade growth in the region is growing, but not always for the benefit of its national carriers. Far East carriers are increasing frequencies to this large continent, which can somewhat offset loss of business on the Asia/Pacific and Asia/Europe sectors.
Three areas, not the world’s largest, but ones which may help keep the steady growth in line coupled with the results of all others.
We should however not disregard Europe, Asia and N. America as being failing markets.
On the contrary, they are strong, carry the bulk of all cargo volumes, but are not strong enough and what counts in the air cargo business, as in any other; is to make a decent profit in order to be able to keep the product flying.
Turkey, whether it sees itself in Europe or the Middle East, is facing heavy internal strife, but is definitely another “cargo hub champion” of the future.
All in all, despite many weak carriers, rates still in the cellar and the need for further cost cutting in some areas; let’s look at 2014 positively.
It can’t be worse than 2013! - and if all markets manage to outperform 2013, then we’ll go over the 2% - right?
John Mc Donagh