Improvements in business confidence and US consumer confidence indicators have led economistsand air cargo industry executives to anticipate a return to air cargo growth in 2013, albeit at a
low level, despite a slight downgrading in world-trade expectations.The JPMorgan Global Manufacturing PMI, based on surveys with more than 10,000 purchasingexecutives in 32 countries, in December rose above the ‘no-change mark’ of 50.0 for the first timesince May 2012. The increase to 50.2, from 49.6 in November, indicated that the globalmanufacturing sector had continued to stabilise in the final months of last year, according to theleading survey’s authors.
PMI indices tracking trends in output, new orders and employment also rose further from lowsseen during mid-2012. Global manufacturing new-export orders declined for the ninth successivemonth in December, although the rate of contraction eased to its lowest level since May 2012.
Julie Perovic, senior economist at the International Air Transport Association (IATA),commented: “The Purchasing Managers Index provides an indication of how confident – or not –businesses are about demand for their goods. In turn, this provides an indication of whether theywill transport by air. Over the last few months, there has been an improvement in businessconfidence. We are also encouraged by the increase in US consumer confidence.”
Perovic described the improvements as “not great”, but recent improvements in US consumerconfidence had encouraged IATA to expect some growth in 2013, an improvement compared with2012.
“Although air freight demand has been negatively impacted by the more pessimistic Europeanconsumer, improvements in US consumer outlook could help offset some of that downward pressure ondemand. We expect cargo volumes to improve next year compared to 2012, and that is in line withexpectations for economic growth, and importantly, for world trade.”
She said during the second and third quarters of 2012, IATA had expected to see a bigger reboundin world trade growth in 2013. “That outlook has now been revised down, and so has our view for airfreight volumes, but we still expect volumes to be better than in 2012.”
Perovic observed that the historic link between air cargo volumes and world trade volumes hadweakened over the last few years, with global trade volumes continuing to expand during periodswhen air freight has been falling. This was because much of the recent growth in world trade hasbeen driven by emerging markets – such as China, India and Latin America – where much of the growthhas come in demand for bulk commodities “such that the expansion in world trade has been in favourof sea transport”, said Perovic. “Western economies have seen less growth, and with that the demandfor high-value, low-weight goods, which are usually transported by air, has declined.”
On a regional basis, she said Middle East and African airlines “have actually experienced solidgrowth”, with Middle East airlines, in particular, having experienced about a 20% increase in FTKssince early 2011, thanks in part to increasing trade with the African continent that had helpedboost air freight demand for both African and Middle Eastern airlines. Airlines in Asia-Pacifichave seen the largest declines, with FTKs having fallen by about 15% since early 2011. NorthAmerican and European airlines have mostly followed the global trend.
“Looking ahead, the outlook is a bit better than what we have experienced recently,” predictedPerovic. Trying to explain both the recent poor performance and the improved outlook, compared withlast year and the 2008-2009 recession years, she observed that there was no “inventory overhang” atpresent, unlike during the collapse in air freight volumes in 2008, “when the inventory-to-salesratio spiked and businesses saw no need to transport goods quickly, leading to the major decline inglobal freight-tonne kilometres (FTKs)”.
December’s JPMorgan Global Manufacturing PMI data “signalled that manufacturers currentlymaintained a preference for leaner inventory holdings”, with stocks of purchases and finishedproducts both declining further during the latest survey period, according to JPMorgan andbusiness-survey specialist Markit Economics.
David Hensley, Director of Global Economics Coordination at JPMorgan, commented: “PMI surveyindices for output, new orders and employment continued to lift at the end of 2012, as the globalmanufacturing sector stabilises following a softer patch in the middle of the year. With the rateof inventory accumulation also remaining low, the [manufacturing] sector should, barring anydisruptions, advance further into expansion territory at the start of 2013.”
IATA is forecasting that global air cargo demand will increase by 1.4% in 2013, which will be “not enough to make up for the 2% decline in 2012” and well below the expected growth in global airpassenger demand and capacity, and the associated increase in the cargo ‘bellyhold’ capacity ofpassenger airlines.
IATA predicts that this mismatch between growth rates for passenger and cargo demand, whichtends to lead to cargo capacity in excess of demand and airline cargo yields falling, will resultin a 1.5% reduction in airline cargo yields, per tonne-kilometre flown.
Cathay Pacific was among the cargo-carrying airlines that experienced a better fourth quarter of2012. Cargo volumes carried by Cathay Pacific and sister airline Dragonair in December were up 3.4%compared to December 2011, the fourth month in a row it has seen a year-on-year growth intonnage.
Cathay Pacific general manager for cargo sales and marketing, James Woodrow, commented: “Thecargo market had been in the doldrums since April 2011, so it was good to see the year ending on astronger note. However, the cargo and mail tonnage carried in 2012 was still some way behind the2010 total.” For the whole of 2012, tonnage carried by the group declined by 5.3% while the airlinecut its cargo capacity by 3.1%.
Meanwhile, home airport Hong Kong, the world’s largest international cargo airport, saw volumesincrease by 7.6% in December and 2.2% for the year as a whole.
Despite a disappointing 2012 in volume terms, Lufthansa Cargo chairman and CEO Karl UlrichGarnadt is optimistic about the prospects for 2013. “We can see green shoots of economic recoveryin key air freight markets,” he said.
The German carrier saw freight and mail volumes decline by around 8.5% in 2012, “attributable to restrained demand in all traffic regions”, to which the company reacted bysharply scaling back capacity, by more than 8%, in an attempt to maintain utilisation and yieldlevels.
Lufthansa’s home airport Frankfurt reported a similar disappointing picture in 2012, but alsoexpressed optimism about 2013. Europe’s largest cargo airport reported a 6.7% decrease year-on-yearfor 2012, although in December, this had eased to a 1.5% decline.
Stefan Schulte, chairman of Frankfurt Airport operator Fraport, commented: “The weak globaleconomy has played a crucial role in the development of the cargo market. But this negative trendhas been slowing, with the decline in cargo tonnage reduced significantly by the end of the year.Thus, the trend is now continuing in the right direction.”
Following FedEx’s most recent financial report in December, FedEx forecast a “modest” 2.5% GDPgrowth for the global economy in 2013, and its forecast for the US was for 1.9% GDP growth, alongwith an industrial-production forecast of 2.4% growth. The company also reported that persistentweakness in the global economy and a shift from high-yield premium international services tolower-yielding economy international services had limited the profitability of FedEx Express.However, FedEx reported “some positive trends from key customers” and improved volumes out ofAsia-Pacific and Europe in the three months to 30 November.
