1Q16 — a difficult quarter

March 2016 statsWith March results now in from many of the world’s major carriers and airports, we should be able to see a clearer picture of the start to 2016, both for the overall trend of air freight demand, as well as at the individual carrier/airport level.

Regarding overall demand, it is important to remember that in early 2015, labor problems at the US West Coast ocean ports and a major airbag-related auto recall in the US gave a large boost to air freight traffic, particularly on the trans-Pacific. While the shift to air had begun to ease in March, it was still a factor, and this makes for a somewhat tougher than usual comparison in March 2016. Looking only at the numbers in the chart, it would be easy to conclude that March was not a good month. But bearing in mind the somewhat tough comparison, and also the fact that the many of the carriers that have been doing very well lately do not report their monthly results, our expectation is that underlying worldwide air air freight demand for the month was likely flat or very slightly positive.

For the quarter as a whole, the comparison is exceptionally tough, and when IATA and WorldACD publish their data next week, we expect them both to show air freight demand down slightly from 1Q15. However, as IATA pointed out when it published its February data, comparison to 2014 may provide a more accurate picture of underlying demand trends. For the first two months of this year, IATA reported cargo traffic down 1.6% compared to the same period in 2015, but up 6.3% over 2014 — an annualized growth rate of 3.1%.

Finally, regarding individual carriers, it is instructive to look at data from their home airports – almost all of which did much better than the carriers. This leads us to believe that the trend of market share moving from long-established carriers to some of their newer competitors is continuing.

Now for the details…

Asia Pacific

Cathay Pacific Airways reported March cargo traffic down 4.1% y-o-y to 891 million RTKs. This follows a 5.2% decline in the combined January/February period, and brings the carrier’s cargo traffic for the first quarter of 2016 to 2.43 million RTKs, down 4.8% compared to the first quarter of 2015. Commenting on the December performance, Cathay Pacific General Manager Cargo Sales & Marketing Mark Sutch said: “Cathay Pacific General Manager Cargo Sales & Marketing Mark Sutch said: “Following a generally weak February, we saw some improvement in airfreight demand in March. This was helped by the shipment of new consumer IT products out of the major manufacturing cities of Western China. There was a pickup in traffic on key transpacific routes, and we mounted a number of additional flights into India in response to continued robust demand. Overall, however, the air cargo markets remain soft and yield remains under pressure in what is a highly competitive environment.”

Hong Kong International Airport reported cargo volume in March up 1.1% y-o-y to 368,000 tonnes. This is an improvement over the combined January/February decline of 6.1%, but still leaves HKG’s first-quarter handle down 3.5% to 987,000 tonnes. Commenting on the March results, HKIA said: “[get quote]” Worth noting is the difference between the airport’s 1.1% March increase and Cathay Pacific’s 4.1% decline, an indication that Cathay may be losing market share to other carriers.

Beijing-based Air China reported its March cargo traffic up 5.6% y-o-y to 588 million RTKs. International and domestic traffic were both up 5.7% to 439 million RTKs and 139 million RTKs, respectively, while the much smaller regional traffic was up just 1.0%. For the first quarter Air China’s cargo traffic was up 4.3% to 1.56 billion RTKs. still showing growth, up 3.5% to 968 million RTKs.

Guangzhou-based China Southern Airlines reported February cargo traffic up 21.0% y-o-y to 518 million RTKs. This follows solid 9.4% growth for the combined January/February period. The March increase was driven by 30.5% y-o-y growth in international traffic to 374 million RTKs, while domestic traffic was up just 1.9% to 143 million RTKs. For the first quarter of 2016, China Southern’s cargo traffic was up 13.5% to 1.36 billion RTKs.

Shanghai-based China Eastern Airlines, continues to underperform its Chines rivals, reporting March cargo traffic down 2.9% y-o-y to 419 million RTKs. Domestic traffic jumped 12.8% for the month to 85 million RTKs, but this was not nearly enough to overcome a 6.3% drop in the much larger international traffic to 323 million RTKs. For the first three months of 2016, China Eastern’s cargo traffic was down 7.9% to 1.12 billion RTKs.

Shanghai Pudong International Airport Cargo Terminal Co Ltd (Pactl, the biggest handler at Shanghai’s Pudong Airport) reported a 6.8% y-o-y increase in its March cargo handle to 142,000 tonnes. This follows lackluster results in the first two months, when Pactl’s handle was down 1.6%, and brings the first quarter total to 368,000 tonnes, up 1.5% over 1Q15.  International cargo in March was up 6.8% to 133,000 tonnes, while the much smaller domestic handle was up 6.3% to 9.000 tonnes (most of Shanghai’s domestic cargo moves through nearby Hongqiao Airport.

Singapore Airlines reported March cargo traffic up 1.1% y-o-y to 594 million RTKs. For the first quarter of this year, SIA’s cargo traffic was up 2.0% to 1.61 billion RTKs.

Taiwan-based EVA Air reported March cargo traffic down 15.2% y-o-y to 295 million RTKs, continuing a long-established pattern of declines. For the first three months of 2016, EVA’s cargo traffic was down 16.2% to 796 million RTKs.

Europe & Middle East

Lufthansa reported a steep 10.5% y-o-y fall in Group cargo traffic in March to 826 million RTKs. This follows a 2.0% decline in January and 5.4% drop in February, and for the first quarter of 2016, Lufthansa’s Group cargo traffic was down 6.2% to 2.26 billion RTKs. On a regional basis, Group cargo traffic for the quarter was down 10.1% to 996 million RTKs on the trans-Atlantic lane, down 2.7% to 989 million RTKs on the Asia-Pacific lane, and down 5.6% to 193 million RTKs on the Middle East/Africa lane

Air France-KLM continued to report steepening declines in cargo traffic, with March down 13.5% y-o-y to 711 million RTKs. This follows drops of 0.1% and 9.7% in January and February, and leaves the carrier’s cargo traffic for the quarter down 10.1% to 2.26 billion RTKs. Air France-KLM cut its cargo capacity by 10.7% in March and 8.1% in the quarter, as the group continues to reduce its freighter fleet. At the end of 2015 Air-France KLM operated nine freighters, including three 747-400ERFs, one 747-BCF, two 777Fs and three MD-11Fs. The fleet has now shrunk to seven, and by mid-2016, the carrier says it will remove another two freighters, leaving only two 777Fs based in Paris and three 747-400ERFs based in Amsterdam.

International Airlines Group reported March cargo traffic down 5.4% y-o-y to 459 million RTKs. This follows modest increases in January and February, and drags the carrier’s first-quarter cargo traffic into negative territory, down 1.8% compared to 1Q15.

Frankfurt Airport (FRA) reported its March cargo handle down 1.3% to 187,000 tonnes. For the first three months of 2016, FRA’s handle was down 1.0% to 506 million tonnes.

London’s Heathrow Airport (LHR) reported its February handle down 3.8% y-o-y to 132,000 tonnes. For the first quarter of 2016, LHR’s handle was up slightly (0.4%) to 372,000 tonnes.

Amsterdam’s Schiphol Airport reported its March handle up 0.5% to 140,000 tonnes. For the first three months of 2016, AMS’ handle was up 0.8% to 389,000 tonnes.

Turkish Airlines reported March cargo volume up 7.8% y-o-y to 67,000 tonnes, continuing its long-standing pattern of solid gains. For the first quarter of 2016, Turkish’s cargo volume was up 10.6% to 179,000 tonnes.

Americas

Cargo traffic continued to fall at Chile-headquartered LATAM Airlines Group, which reported March traffic down 11.1% y-o-y to 285 million RTKs. For the first quarter of 2016, LATAM’s cargo traffic was down 9.8% to 875 million RTKs.

United Airlines reported March cargo traffic down 5.9% y-o-y to 330 million RTKs. For the first quarter of 2016, United’s cargo traffic was down 6.0% to 908 million RTKs.

American Airlines Group reported March cargo traffic 1.4% y-o-y to 297 million RTKs. For the first three months of this year, American’s cargo traffic was down 1.8% to 793 million RTKs.

Delta Air Lines reported March cargo traffic down 17.5% y-o-y to 237 million RTKs. For the first three months of this year, Delta’s cargo traffic was down 13.2% to 693 million RTKs.

 

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