Monday, December 16, 2013

Mixed Messages from Air Freight Sector as Cargo Numbers Reported

IATA Analysis Presents a Confused Global Picture with Middle East the Clear Favourites
Shipping News Feature

WORLDWIDE – Mixed messages from the International Air Transport Association (IATA) with the publication of October’s cargo statistics earlier this month showing a small increase in freight carriage, but indicating a more pessimistic view of the year overall. IATA, which represents the views and statistics for some 240 airlines comprising 84% of global air traffic, describes cargo demand as ‘largely stagnant’ predicting the carriage of 52.5 million tonnes in 2014 compared to this year’s anticipated final total at around 51.6 million tonnes.

This modest upturn is expected to be negated by a predicted 2.1% drop in yields leaving total returns for the two years at $60 billion, a figure similar to 2007 levels following 2011’s high of $67 billion. In October, global freight tonne kilometres (FTK) grew 4% as against 2012 with an increase in all global regions except Africa. North American airlines reported growth overall of 3.7% yet some are performing markedly better, with American Airlines already quoting numbers for November indicating a massive 17% jump in freight volume against 2012, those numbers preceding the close of the merger with US Airways.

The two members of the AMR Corporation continue to operate as two separate companies, but plans for integrating both airlines have already begun with AA outperforming major national rivals in both monthly and year to date freight traffic, leading Jim Butler, President of American Airlines Cargo, to say:

"We're very pleased with the legacy American achieving its seventh consecutive month of year-over-year traffic growth. In fact, the team set a new record in November for the total weight loaded onto one of our 777-300ER aircraft on a flight from New York-JFK to London Heathrow. This momentum combined with the recent merger close position the new American to be a stronger, more successful airline.

"Our cargo team has been working long hours for quite some time now, and we're making progress on our goal of becoming the greatest airline in the world. While we expect this integration [operation with US Airways] to be complex and to last for quite some time, we're committed to keeping our customers our top priority. The new American will offer our customers a larger global network which means more choices for shipping."

North American figures were bound to look favourable in October given the reduction in trade caused by September's seventeen day government shutdown and, although manufacturing is said to have increased output for the past three months, the expansion is much slower than at the start of the year. Given that year-to-date there has been a decrease of 0.9%, it is clear that the outlook remains difficult.

In the IATA October reports, the big winners once again were the Middle Eastern carriers which reported an overall rise of 12.3% after September’s Ramadan slow down, whilst the increasing fleets of the regions carriers meant capacity matched the growth in cargo, up 12.1%. The Middle Eastern trend was followed by the expansion of trade for European carriers of 4.4% FTK’s meaning the two regions combined carried three quarters of the cargo increase over the six complete months to the end of October.

Whilst Europe pulls slowly out of recession, growth slowed in Q3 to just 0.1% from 0.3% in Q2 and lack of investment meant capacity grew only 3.6%. Asia-Pacific carriers’ traffic grew 2%, with capacity up 4.1%. Asian cargo volumes benefited from a resurgence in trade across the region, fuelled by a stronger Chinese economy where manufacturing activity hit a 7-month-high. Both export and import volumes rose strongly in emerging Asian markets, reversing a mid-year decline which IATA forecasts bodes well for further growth in regional air freight in the months to come.

Overall however IATA warns that two forces are influencing a negative trend, that of ‘on shoring’ production, which sees protectionism reducing import/export traffic whilst the liberalisation of trade in previously low cost economies means higher production costs driving buyers elsewhere. This is likely to prove influential for years to come and IATA puts a lot of faith in the World Trade Organization’s (WTO) Bali agreement drafted earlier this month, which aims to facilitate international trade by removing barriers and reducing red tape.

Photo: Courtesy of American Airlines.