September air freight improvement masks overall trend of decline

Airlines around the world reported a slight increase in air freight volumes in September,although month-on month figures showed a small decline and year-to-date volumes remain down almost

Member airlines of the association saw overall global volumes carried, measured as freight tonnekilometres (FTKs), increase by 0.6% year on year in September, with domestic improving 1.3% andinternational by 0.5%. But month-on-month volumes declined by 0.6%, “eroding the small gains seenin August”, IATA observed.

All the major regions experienced year-on-year declines, while year-to-date FTKs are down by1.9%, with international traffic falling by 2.4%, offset by a 1% increase in domestic FTKsflown.

The association commented: “The minor 0.6% year-on-year growth posted for air cargo is lesssignificant than the 0.6% fall in air freight volumes between August and September, which is moreindicative of the trend. This is the second notable month-on-month fall in air freight growth in asmany months. This has eroded the stability in volumes achieved earlier in 2012.”

Capacity was trimmed 0.6% compared to year-ago levels. This strengthened the average freightload factor slightly to 45.6% from 45.1% a year ago.

However, on a positive note, IATA noted that the introduction of new consumer products such asthe iPhone 5 could offset some downward pressure from the current generally weak businessenvironment.

On a regional basis, Asia-Pacific carriers saw a 1.6% decline in demand in September compared tothe previous year. IATA noted that this was an improvement compared with the 5.3% year-on-yeardecline experienced by Asia-Pacific carriers in August, “but still no progress compared to a yearago”. Capacity was down 3%, leading to a slight improvement in cargo load factors.

North American airlines had a 1.1% drop in cargo demand, against a 3.1% drop in capacity. Loadfactors climbed 0.7% points to 35.2%. European airlines had a 0.4% decline in traffic, but capacityclimbed 1.2%, leading average load factors to drop 0.7% points to 45.6%.

Middle Eastern carriers were the main driver in the overall global volume increases inSeptember, reporting a 16.3% rise in traffic on a 6.9% rise in capacity, pushing up load factors by3.8 points to 46.1%. African carriers saw a 4.1% rise in demand with capacity up 1.4%, raising theload factor 0.6% points to 24.1%, the lowest for any region.

Latin American airlines’ demand slipped 1.6%, while capacity jumped 9%, resulting in a loadfactor of 37.8%, down 4.1% points.

Air freight forwarding specialist Panalpina this week reported that its air freight volumesdecreased by 8% in the third quarter, against a market drop of 4%, year-on-year. It saidEurope-related trade lanes continued to face the greatest challenges, while the trend towardssmaller shipments had also impacted volumes.

Express operators around the world continue to observe a trend towards smaller shipments,fuelled by a mixture of caution among shippers against a background of investment uncertainty, andby the expansion of e-commerce. Express operators also report down-trading by customers frompremium express products to cheaper alternatives, as well as down-trading from express to airfreight, and from air freight to surface transport.

FedEx chairman Fred Smith last month told analysts that the US domestic express market was nolonger growing and FedEx had been forced to change its express strategy in response to thefinancial crisis and slower international economic growth. Smith said FedEx Express would focus onthe international express business in future while the freight forwarding business FedEx TradeNetworks would be further expanded.

He emphasised that the international air express market was growing as a proportion of theoverall air and ocean freight market, reaching $32 billion, or 11% of the overall market, by 2011.In comparison, air freight was worth $46.3 billion, or 15% of the market, down from 20% in 2004,while ocean freight has grown to $225 billion, or 74% of the market.

UPS’s president of International, Dan Brutto, last month said the company’s air network to andfrom Asia, having been cut by around 10% this year, was now broadly in line with demand, leading tosignificant improvements in aircraft utilisation. But he said the company had still been addingcapacity to lanes where demand justified it − for example, to and from western China, in responseto the continuing shift of industry in China towards the country’s western interior.

UPS reported that its international package business had rebounded in the third quarter, withAsia seeing a slight increase in exports after several quarters of declining figures. Brutto saidUS exports continued to disappoint, while European export package volumes were slightly up.

Meanwhile, TNT Express last week said that the weakness in the global air freight market hadadded to the challenge of renegotiating its agreement with Emirates Airline, which leases B747freighters from TNT and takes ‘blocked-space’ on its TNT’s transatlantic B777 freighters. TNT saidit was looking into alternative options, and said it hoped to minimise any impact on its 2013financial results in the event that it has to find another solution in the market.