Fleet cutbacks, cost saving initiatives, staff redundancies and other issues have been widely reported for the air cargo industry during the past few months. Figures to-date show a continuing decline in cargo transports and as we now pass the half-way mark for this year, the question in some minds is whether 2019 will turn into disaster.
May figures confirm continued decline
We follow closely month-by-month the air cargo statistics issued by IATA and WorldACD. In general, both usually come to the same conclusion and their figures are more-or-less on a par to each other although IATA tends to concentrate on FTKs, whereas WorldACD looks closer at chargeable weight.
Both have shown that the first five months of this year are not good and maybe an indication that there is worse to come.
Latest figures indicate that chargeable weight flown went down by 5% when calculated year-over-year (YoY). WorldACD notes that YoY general cargo transport has dropped by -7.2%. Also surprising is that that special cargo (pharma etc.) now is at -0.1% YoY. Is this because there is a tendency back to ocean freight for such cargo?
Yield however tends to be a more worrying long-term problem. Higher yields bring more revenue, hence better bottom line results.
May average yields dropped again and were -2% MoM and YoY they are approaching the -6% mark (-5.6%). On top of this average load factors dipped again by -2.1% YoY. These two factors, plus a trend for a continuing decline in volumes carried, are worrying airline CFOs across the globe. If this trend worsens during the second half of this year and the annual peak period falls away, then there will be more drastic measures being taken.
No reason to panic?
Air freight is a volatile business, and always has been. The industry has gone through worse times than we are presently facing.
But, our world is also changing fast. Liberalisation is being replaced by Populistic groupings in almost all corners of the world. Short term results have been the trade wars triggered by the USA and China and one just has to look at May’s Asia-Pacific air cargo results to see that if the situation gets out of control, then air freight could well be the long-term loser.
We now are in the midst of the summer lull with the hope that the last quarter will bring figures back to an almost acceptable level for all concerned. If not - carriers will cut back, forwarders will lose volumes and handlers will either be pressured to lower their rates further or risk losing airline clients.
A vicious circle that none of us need!
WorldACD in their May rundown quite rightly point out that 2018 was a bumper year for air cargo and that it would be more realistic to compare present figures with those of 2017. If that were the case, then we’d have a +1% growth pattern on the books.
Not to be forgotten either is that larger freight carriers are now fighting each other for traffic as volumes fall and capacity remains higher than present demand warrants.
The e-commerce market continues its climb, but many carriers and airports are still not geared towards cashing in on this market despite all signals that “it’s the future.”
Time to put the thinking hats on again in some areas. The larger traditional airports become less interesting for e-commerce and carriers are forced to look more closely at regional airports if they want to get in on the act.
No reason to panic - but awareness and the political instability around the world must give reason for caution and more forward-thinking.
At least Boeing remains optimistic - they would be of course, as they have to sell aircraft. Their long-term study (again) shows the need for many hundreds of new freighters in the future.
Wait and see!
John Mc Donagh