Will the Second Half of 2016 Show a Cargo Turnaround?

The air cargo market continues as a volatile problem child for the airlines, handlers and shippers.
January to June figures showed slight pick-ups in some of the most important trading areas, but also worrying declines in markets within the South American and African regions.
Whether the cargo flows pick up enough during the second half of this year to warrant all players to have some more confidence, remains to be seen.

British Airways will use a Boeing 777 instead of their 747 on flights to Sao Paulo.
British Airways will use a Boeing 777 instead of their 747 on flights to Sao Paulo.

July figures indicate some growth
Freight tonne Kilometers (FTKs) rose by 5% in July compared to the same month last year. This, according to IATA statistics, represents the fastest growth per month for the past 18 months.
However, freight capacity, also measured in FTKs, rose by 5.2%, which went past actual demand and keeps rates and yields under heavy pressure.

On the one side good news and maybe reason for hope, as  also the June 2016 figures gave a three percent  weight growth year-on year  and it was hoped that this trend would continue or even exceed itself.
On the other hand - no real reason for the carriers to jump for joy.

The growth and decline seems to be equally split between the northern and southern parts of the globe.
Africa and South America, which were a year or two ago being heralded as the future growth markets, hit a further low in growth by -1.2% for Africa and almost 2% for South America.
Whether the South American industry, specifically, Brazil, Argentina and Venezuela will manage to get back to some form of normality, really remains to be seen.
The heavy political unrest in these areas is forcing future investors to look elsewhere and foreign companies situated there are busy looking for feasible alternative locations.

Already European carriers have announced capacity cuts to Sao Paulo as of the winter flight plan.
British Airways will use a B777 instead of the B747, Lufthansa will stop the Munich - Sao Paulo altogether, swiss will drop from ten to seven SAO flights per week and KL also will readjust.
Brazil’s Gol Airlines will reduce flights by 20% and plans to get rid of 20 aircraft in the coming months.
This development is not good for the countries concerned and will probably ensure that year-end air cargo growth, yields and revenues will hit an all time low.

Advertisement
Advertisement

African countries, of which many are in the meantime being supported with Chinese investment, now seemingly have too much belly and all freighter capacity to deal with.
Gulf carriers also have invested heavily in new sectors to African states.
But is this paying off?

Northern hemisphere to the rescue?
The wide body aircraft capacity pumped into Africa and South America during the past two years cannot because of the weak market situations there,easily be siphoned off into other  global areas.

Although the northern hemisphere continues to hold somewhat stable, this can also be deceiving as it’s the Asia Pacific region which is the only one which has positively bounced back.
The WorldACD data shows that this area alone had a 3.7% increase in July compared to Europe with its meagre 0.2% increase.
Whether this forced drop in belly capacity to the weaker performing regions will lead to better revenues and yields, remains to be seen.

Probably not, as  the markets themselves are diluted and the fight is on for the cargo still remaining.

Still a tough few months to go before 2016 results will become transparent.

John Mc Donagh

Write a comment

Comments: 0