Air freight demand growth accelerates in May

Updated 16 June, 2017. 

With results in from many of the world’s major cargo carriers and airports, it looks like air freight demand growth in May was extremely strong – perhaps not as strong as what we saw in March, but definitely stronger than April. And since demand worldwide (whether measured in tonnes, freight tonne kilometers, or direct tonne kilometers) was just shy of 10% in April, we expect that when IATA and WorldACD publish their detailed analyses in two weeks, we will see growth back in double digits.

Of course there is more to the air freight industry than demand growth – profitability matters, too. Most carriers do not include revenue data in their monthly statistics, but we note that the two that do (Taiwan-based EVA and China Airlines) reported cargo revenue up much more strongly than cargo traffic. Whether these two carriers’ revenue growth is representative of the whole industry remains to be seen, but we await WorldACD’s May yield summary with great anticipation.

Now for the details…

Asia Pacific

Beijing-based Air China reported April cargo traffic up 9.7% y-o-y, to 647 million RTKs. International traffic was up 12.8% over May 2016, to 503 million RTKs, while domestic traffic was almost flat (up 0.2%), at 135 million RTKs. The much smaller regional traffic was down 1.6% to 9.5 million RTKs. For the year through May, Air China’s cargo traffic was up 6.0% to 2.89 billion RTKs.

Cathay Pacific Airways reported May cargo traffic up 8.0% y-o-y to 899 million RTKs. This is an improvement over the 6.2% gain reported in April, though still smaller than the phenomenal 15.4% jump in March.  For the first five months of 2017, Cathay’s cargo traffic was up 8.4% to 4.46 billion RTKs.

Discussing the results, Cathay’s General Manager Cargo Sales & Marketing Mark Sutch said: “Our cargo business continued to show strong year-on-year growth in May. While the market slowed down during the local Labour Day and Japan’s ‘Golden Week’ holidays, it promptly rebounded on all routes, especially those serving Northeast and Southeast Asia. Yield and demand continued to improve, which reflects the overall strength of the air freight industry. To take advantage of market conditions, we have bolstered our freighter fleet by wet-leasing two Boeing 747-8 freighters from Atlas Air Worldwide, which will supplement capacity on our existing network, including destinations in the United States and Europe.”

Guangzhou-based China Southern Airlines reported May cargo traffic up 23.4% y-o-y to 626 million RTKs. The overall growth came on the back of a 33.1% jump in international traffic to 480 million RTKs, while domestic traffic was down slightly (0.5%) to 144 million RTKs. For the first five months of the year, China Southern’s cargo traffic was up 16.8% to 2.16 billion RTKs.

Shanghai Pudong International Airport Cargo Terminal Co Ltd (Pactl, the biggest handler at Shanghai’s Pudong Airport) reported a 13.0% y-o-y increase in its May cargo handle to 154,000 tonnes, its best monthly result this year.

Pactl started the year strongly, with a 12.3% y-o-y increase for the combined January/February period, and stayed in double digits with an 11.4% in March tonnage. April saw a bit of a fall-off, with growth dropping to 9.6% over April 2015. This was part of a worldwide trend of slowing (though still strong) growth in April, and we wondered if it was the beginning of a return to slower growth for the rest of the year. But if Pactl and the few other big carriers and airports that have so far reported provide a reliable guide, then it looks like demand for air freight is still growing at a pace we have not seen for many years.

International volume for the month was up 14.5% to 146,000 tonnes, while the much smaller domestic volume was down 7.5% to 9,000 tonnes (most of Shanghai’s domestic cargo moves through nearby Hongqiao Airport). For the first five months of 2017, Pactl’s handle was up 13.0% to 718,000 tonnes.

Taiwan-based China Airlines reported May cargo traffic up 1.5% y-o-y to 463 million RTKs, the tenth month of increased traffic after a long period of declining demand. But, while CAL’s cargo traffic is growing modestly, cargo revenue is soaring – up 17.5% y-o-y in May. Year-to-date, CAL’s cargo traffic was up 5.5% to 2.21 billion RTKs, and cargo revenue was up 16.2%.

Taiwan-based EVA Air reported May cargo traffic up 3.1% y-o-y to 307 million RTKs. the carrier’s twelfth consecutive positive result after a long period of declines. As is the case with fellow-Taiwanese carrier China Airlines, EVA’s cargo revenue is growing much more strongly than its traffic – up 11.8% y-o-y in May. For the year to date, EVA’s cargo traffic was up 5.0% to 1.46 billion RTKs.

South Korea’s Incheon Airport reported its May cargo handle up 7.7%, to 594,000 tonnes. Year-to-date, ICN’s handle was up 10.7% to 1.17 million tonnes.

Europe & Middle East

The demand recovery at Lufthansa that started in July and August last year, continued through the first five months of 2017, with the carrier reporting Group cargo traffic up 7.2% y-o-y in May to 903 million RTKs. The growth was led by a 7.9% increase in traffic on the trans-Atlantic lane to 387 million RTKs, while traffic on the Asia-Pacific lane was up almost as much – up 4.3% to 415 million RTKs. Traffic to/from the Middle East and Africa rose 4.8% to 67 million RTKs. For the first five months of this year, Lufthansa’s cargo traffic was up 7.6% to 4.30 billion RTKs.

Air France-KLM reported May cargo traffic up 3.8% y-o-y to 725 million RTKs – the third consecutive month of positive growth after several years of declines. Of the two carriers in the group, Air France reported its May traffic up 7.2% to 313 million RTKs, while KLM reported growth of 1.3% to 411 million RTKs. For the year to date through May, AF-KLM’s cargo traffic was up 1.4% to 3.49 billion RTKs.

International Airlines Group reported May cargo traffic up 4.6% y-o-y to 474 million RTKs. While this may seem a relatively modest increase, we note that a power failure at London’s Heathrow Airport forced the cancellation of almost half of IAG subsidiary carrier British Airways’ flights for two days in late May. Despite this, BA’s cargo traffic (which generally makes up close to 80% of IAG’s total) was still up 3.9% for the month. For the first five months of 2017, IAG’s cargo traffic was up 3.7% to 2.31 billion RTKs.

Turkish Airlines reported May cargo volume up an amazing 33.2% to y-o-y to 96,000 tonnes – not quite a big a jump as the 35.8% growth the carrier reported in April, but still almost twice the increase of any other major airline. This follows strong growth in the first quarter, and pushes Turkish’s cargo volume for the first five months of 2017 to 323,000 tonnes, up 26.1% over the same five months in 2016.

Frankfurt Airport (FRA) reported its cargo handle up 5.1% y-o-y to 187,000 tonnes in May. For the first five months of 2017, FRA’s handle was up 4.8% to 908,000 tonnes.

London’s Heathrow Airport (LHR) reported its May handle up 10.7% to 1144,000 tonne. Year-to-date, LHR’s handle was up 8.3%, to 681,000 tonnes.

Americas

After years of declines, cargo traffic growth turned positive for Chile-headquartered LATAM Airlines Group, which reported May traffic up 1.3% y-o-y to 271 million RTKs. While this is a welcome change, it still leaves LATAM’s cargo traffic for the first five months of 2017 down 4.8% to 1.35 billion RTKs. As we reported in April, as part of an ongoing restructuring process, LATAM Cargo appointed Andrés Bianchi as its new CEO. Under Bianchi’s leadership LATAM said it would focus on increasing competitiveness through productivity enhancements and improvements to its product portfolio. Whether the return to demand growth in May marks the beginning of a real turnaround remains to be seen, but it must have brought welcome relief to the carrier’s cargo team.

United Airlines reported May  cargo traffic up 23.7% y-o-y to 412 million RTKs, its fourteenth consecutive month of strong gains. Year-to-date, United’s cargo traffic was up 20.% to 1.89 billion RTKs.

American Airlines Group reported May cargo traffic up 16.8% y-o-y to 349 million RTKs. For the first five months of this year, American’s cargo traffic was up 14.1% to 1.58 billion RTKs.

After a long period of declining cargo traffic, a turnaround plan at Delta Air Lines appears to be paying off. The Atlanta-based carrier reported May cargo traffic up 12.2% y-o-y to 269 million RTKs. This follows gains of 5.7% and 9.5% in March and April, respectively, and brings Delta’s cargo traffic for the year to 1.21 billion RTKs, up 3.5% over the first five months of 2016.

Those interested in learning more about where demand for air freight is headed, are invited to join us at this year’s Cargo Facts Symposium, to be held 2-4 October, at the Ritz-Carlton on Miami’s South Beach. For more information, or to register, visit www.cargofactssymposium.com