There is still hope in the industry that air cargo tonnages may stabilize somewhat by the end of this year.
The recent figures published for June show a strong emergence in both the incoming and outgoing air cargo in the Asia Pacific region.
However, the storm may have just abated for a while, but is definitely not over.
Even a further rise in tonnages might not be of much help to carriers who are suffering under a continued rate war and low yields.
Is there the danger of a further fallback this year?
Two main aspects continue to be the deciding factors as to what direction air cargo movement will end up with by December of this year.
- The decline is general cargo tonnages and the revenues and yields obtainable.
- The continued influx of wide-body belly capacity on trunk routes, especially those originating in the Middle East.
Interestingly enough, the 2nd quarter figures indicate a year-on-year worldwide volume increase of just over 2 percent.
But the figure is not really relevant as data published by WorldACD Market Data show that the smaller country pairs did better than the larger ones.
Capacity keeps moving up, yields go further down
The month of June proved to be the most positive with Freight Tonne Kilometers (FTKs) rising by almost 4.5 percent, which according to IATA is the largest growth of the past fourteen months.
But, also freight capacity on offer also moved up again, increasing by just near to 5 percent.
June was not good for all regions however.
Latin America, a year or two ago claimed as being a future market leader, dropped back by almost 10 percent.
The Middle East and Europe are reported to have shown the fastest June growth with 8.0 and 5.1 percent respectively.
Tony Tyler remains skeptical
It is not just the influx of wide-body belly capacity which is affecting revenues and yields.
It is interesting to note that since 2008 new wide-body freight aircraft coming onto the market are almost 18 percent higher than those aircraft (freighters) which have been scrapped or placed into the desert in the same period.
Tony Tyler, outgoing head of IATA was not really enthused with the June results, stating that “June saw an improvement in demand for air freight. That’s good news, however we cannot read too much into one month’s performance.”
The cargo capacity on offer, which is mainly heard towards a continued demand for long-haul passenger expansion, can be seen as the millstone around the airline cargo department’s necks.
IATA’s figures and market observations from various sides show that capacity growth is continuing to outgrow the cargo being carried around the world.
Definitely not a healthy sign as carriers pump more and more passenger capacity into the market.
The result is yields declining even further as cargo now becomes a “fill-up” commodity for many.
This is especially noticeable on the North Atlantic routes which offer literally hundreds of flights. In the second quarter of this year, capacity on Europe to North America sector went up by 5.5 percent and cargo carried decreased by a further 1.5 percent.
The signs of a price war are apparent, especially on the Middle East hub sectors.
The Gulf carriers now offer seamless connections via their Dubai, Doha, Abu Dhabi and even Muscat hubs, to almost anywhere in the world.
What are the freight agents actually paying per kilo?
There is little transparency in this respect.
The end of 2016 and on into 2017
The economic outlook is something of a crystal ball gazing exercise at the moment.
Global economic growth has been under a lot of pressure for the past years and this has negatively affected air cargo growth.
Now, two more aspects crop up which may indeed give us a nasty second half year jolt.
The Brexit vote in the UK and the terrorism coming closer to each of our doorsteps.
Those economic wizards, at least those who know what they are talking about, are adamant that although the United Kingdom has not yet officially applied for an out of the EU; that the Brexit decision has turned the tables on 2016 growth expectations and that there will be a sharp decline in world trade by the end of this year.
IATA figures show that especially bulk commodities and the heavy industry trade is performing very poorly this year and that this will put the damper on any hopes for a good 2016.
Who really knows whether the UK will actually Brexit!
Maybe a clever move by Mrs May to put those who promoted and pushed the Brexit decision in charge of organizing the exit.
When they slip up, which many expect and hope for, then is there the signal for the UK and Europe to put this nonsense behind them?
One thing is sure, that will not help 2016 air cargo development.
John Mc Donagh