How is Air Freight Coping in the Q1 of 2015?

The air cargo community results at the end of 2014 gave many high hopes for a “bouncy” 2015. The thought of drastically falling fuel prices, more demand for air-freighted commodities and higher yields for airlines due to a booming perishable and pharmaceutical industry. These and other factors gave reason to hope that the air cargo industry will bounce back.

January 2015 was a disappointing start to the year for air cargo with growth trailing 01-2014 figures  /  courtesy IATA
January 2015 was a disappointing start to the year for air cargo with growth trailing 01-2014 figures / courtesy IATA

´When looking at the IATA or even other rundowns on results for January, one has to wonder which direction the markets are actually showing us.

Luring dangers
IATA’s rundown on January results showed some interesting points.

  • that the cargo business remains weak and is not in a position to deliver acceptable financial returns for investors.
  • the lower fuel prices are misleading carriers into thinking costs will go down and that carriers are not taking into account the fact that lower fuel prices are passed back to consumers. However, the possible upturn on fuel pricing, if it continues at all, could be more demand for cargo transport. This equation only works if the airline industry strictly controls the danger of overcapacity.
  • the general economic demand is seen as being somewhat positive with continued business confidence - but with underlying dangers.
  • and - the dangers are open for all to see.

The escalation of the Ukraine crisis, the distinct danger that oil prices will rise, Middle Eastern war zones becoming extended and last, but not least, some European Union countries getting further into unpayable debt situations.

But still, the world continues to rotate
January’s figures were not that bad, although when one compares the published 11% yield decline compared to the 3% rise in volumes, then we have to ask ourselves from which direction is the danger actually coming from.

The fuel surcharge is starting to become something of the past.
Time will tell during the coming months as to whether most carriers will abolish it altogether on both passenger and cargo flights.
But – let’s be serious – the FS was a means of buoying up the bottom line.
With that gone and rates still at rock bottom levels, even a continued low fuel price will not save some carriers necks.

Freighter puzzle
So, those professing that to bring back old freighters into service because of lower fuel prices should maybe bite their tongues. The market suffers under low enough rates as it is and what happens to those same freighters when the price moves back up?
Fuel is paid in U.S. dollars and most other currencies have dropped considerably, if not dramatically against the revived greenback.

IATA’s Tony Tyler and his team do a good job in analyzing the market and keeping member airlines informed on developments.
At the World Cargo Symposium held recently in Shanghai, Tony concentrated on what he termed as the four main elements for the transformation of the industry.

  • paperless  air freight
  • stricter action on lithium battery transport
  • making sure that the relations between freight forwarders and airlines are enhanced
  • global standard implementation for pharma and other temperature controlled goods.

All very important and worthy subjects to concentrate on.
However, the end of the first Quarter is around the corner and it will be interesting to see what the February and March figures bring in.

John Mc Donagh

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