Declining demand across the markets is sapping the momentum from the air cargo industry. After a two-year stretch of strong growth, demand is lagging behind the (modest) expansion in capacity and yields are turning south.
Traffic statistics from the International Air Transport Association (IATA) for the month of April show a 4.7% decline in freight ton-kilometres, whereas capacity rose 2.6%. IATA noted that this marked 12 months in which capacity growth outpaced demand development.
Alexandre de Juniac, IATA director general and CEO, took a bleak view of the situation.
“April saw a sharp decline in air cargo growth and the trend is clearly negative this year. Cost inputs are rising, trade tensions are affecting confidence, and global trade is weakening,” he said.
The broad picture masks more pointed decreases in some key markets. Asia-Pacific carriers saw demand fall 7.4%, while European airlines suffered a 6.2% contraction in business.
Cathay Pacific, Asia’s largest cargo carrier, saw a 6.2% drop in its FTKs in April.
“The decline in airfreight demand along major trade lanes continued to adversely affect our cargo business in April. It has led to decline in both volume and yield,” said Ronald Lam, director commercial and cargo. “We continue to closely monitor the development of US-China trade relationship and its impact on the world trade flows,” he added.
Cathay fared better than a number of its peers in Asia. Statistics from the Association of Asia Pacific Airlines show a 9.1% slump in FTKs in April for its members.
The region’s major hubs reported similar developments. Singapore’s Changi airport registered a 12.8% drop in volume in April. Hong Kong International Airport, the world’s busiest cargo gateway, saw throughput decline 7.3% in May, which brought its tally for the first five months of the year to 1.9 million tonnes, down 6.3% from the same period in 2018.
According to WorldACD Market Data, April was a kind of watershed for the industry – the first month “in which all regions, without exception, were confronted with the growing impact of adverse market movements that started last September.” Numbers in every region were worse than for the first quarter, “underscoring the clear slow down in global business,” WorldACD diagnosed.
Total chargeable weight was down 6.4% year-over-year and 9.6% month-over-month. Special cargo saw a 2.1% increase year-over-year, but general cargo dropped 9.9%, WorldACD found.
For most Asian carriers, May brought no relief from the gloom. China Southern Airlines managed to buck the general trend with a 1.1% gain in FTKs, but EVA (down 6.0%), China Airlines (down 8.2%), Air China (down 1.6%) and Singapore Airlines (down 3.2%) all posted lower demand in May.
One major concern is that the most important regions for international airfreight flows are suffering the most. “There is no denying that the bigger air cargo regions are hit hardest in the uncertain times we live in,” WorldACD observed. “The contraction of business from these areas was shown in negative percentages not seen for years. And adding insult to injury, the trends in worldwide yields further contributes to worsening results for airlines.”
A reversal of this downward trend is not in sight. Lam remarked that volume and yield “are expected to remain difficult for the foreseeable future.”
Dorothea von Boxberg, chief commercial officer of Lufthansa Cargo, is also pessimistic. Pointing to decline in many large markets, she expects the downward trend to continue in the coming months.
IATA’s projections are a bleak reflection of this development. At the end of last year, the airline body predicted 3.7% growth for 2019. In April it adjusted its forecast to a more modest 2%. It recently felt compelled to make another adjustment, predicting zero percent growth this year.
Lufthansa Cargo has felt the need to make adjustments to the deteriorating business climate. At the end of May the carrier informed its clients that in response to weaker global demand it would “adjust its schedule to reduce its overall offering for the second and third quarters.” Lufthansa announced service cuts “across the entire flight programme in line with trends in demand.”
The retrenchment includes the phasing out of some of Lufthansa’s older freighter contingent of MD-11Fs. “The changes to the schedule will also pave the way for the final withdrawal from service of initially two MD-11F freighters by the end of the year,” the carrier announced.
By Ian Putzger
Air Freight Correspondent | Toronto