Good news from Hong Kong

A week ago, we posted the first results available for April from some of the world’s big cargo carriers and airports. These early results were mixed. There were some big gains – China Southern Airlines’ cargo traffic was up over 20% compared to April 2013, and Shanghai Pudong Airport’s handle was up 14%. But there were also some significant declines, as Lufthansa and LATAM reported declines in traffic of 8% and 12%, respectively. Our conclusion at the time was that while there seemed to be more positives than negatives, it was too early to draw a meaningful conclusion.

What a difference a week makes. With April reports now in from Cathay Pacific, Hong Kong International, Air China, and a few others, it seems safe to say that April 2014 has confirmed the return of growth in air freight demand. Individual results follow below, but first, there is one caveat to be dealt with when describing April as a very good month. The best example is Cathay Pacific, which, although it reported a huge year-over-year jump in cargo traffic, noted that yields are staying dangerously low. This is not an entirely new problem. For almost as long as there has been an air freight industry, there has been someone complaining that other carriers are selling capacity at foolishly low rates and ruining things for the serious players. But this time around is different in that it is unusual to see stubbornly weak yields in a time of strong demand growth.

Too much belly capacity? Carriers being squeezed by forwarders? Forwarders being squeezed by shippers? Competition from the big integrated express operators? Inefficient management at the carriers themselves? We will look at the problem and its possible causes and solutions in the June issue of Cargo Facts, but in the meantime, with demand increasing, there is at least room for optimism.

And on that note, here are both the recently published results from Hong Kong and elsewhere, as well as an updated chart of April demand.

Cathay Pacific Airways reported April cargo traffic up 17.0% y-o-y to 798 million RTKs. After a flat year-over-year performance in January and February, Cathay reported a 19.3% jump in March, and that, combined with the similar jump in April, resulted in a 9.7% increase in cargo traffic for the first four months of this year to 3.01 billion RTKs. Commenting on the April traffic report, Cathay Pacific General Manager Cargo Sales & Marketing Mark Sutch said: “We saw an increase in demand across our freighter network in March and some of that momentum carried through into April. Traffic was also boosted by a pre-Easter rush. But while more long-haul flying and the use of bigger aircraft led to an increase in RTKs, yield continued to be on a downward trend. The general weakness of the world’s airfreight markets coupled with over-capacity in the industry is putting enormous pressure on rates.”

Hong Kong International Airport reported cargo volume in April up 6.0% y-o-y to 362,000 tonnes. Export volume was up 4.9% to 233,000 tonnes, while import volume was up 8.0% to 144,000 tonnes. For the first four months of 2014, HKIA’s handle was up 5.6% to 1.36 million tonnes. Commenting on the April results, “HKIA said the growth was driven mainly by transshipments, which was up 18% from a year ago. During the month, cargo throughput to/from Mainland China improved most significantly compared to other key regions.” Stanley Hui Hon-chung, CEO of the Airport Authority Hong Kong, went on to add: “If we combine the traffic figures for March and April to even out the effects of the Easter holidays, we see strong year-on-year increases in cargo tonnage (8.2 per cent).”

Beijing-based Air China reported April cargo traffic up 9.2% y-o-y to 459 million RTKs. International traffic was up 12.9% to 328 million RTKs while domestic traffic was down 0.7% to 121 million RTKs. For the year through April, Air China’s cargo traffic was up 10.6% to 1.65 billion RTKs.

Turkish Airlines continues to report exceptionally strong results, with April cargo volume up 22.8% y‑o‑y to 56,000 tonnes. For the year through April, Turkish’s cargo volume was up 25.7% to 213,000 tonnes.

There were only two big players reporting negative results in the last week, and a case can be made that one of them is not as negative as it seems. Frankfurt Airport is the hub of Lufthansa, one of the worlds biggest cargo carriers, and Lufthansa’s April traffic fell 8.1% due to a three-day pilot strike. If there had been no strike, it seems likely that FRA would have seen a continuation of the mildly positive trend established in the first quarter. As for Singapore Airlines, the carrier continues to report a serious fall-off in cargo traffic, and after almost three years of steady decline, there is no “yes, but…” explanation that can put a positive spin on the results.

Frankfurt Airport (FRA) reported its April cargo handle down 1.2% y-o-y to 172,000 tonnes. The airport blamed the decline on the three-day pilots’ strike that hit Lufthansa. For the first four months of 2014, FRA’s handle was up 2.7% to 694,000 tonnes.

Singapore Airlines continued its two-and-a-half-year trend of declining cargo traffic, with a 6.7% y-o-y drop in March  to 496 million RTKs. For the year through April, SIA’s cargo traffic was down 4.8% to 2.02 billion RTKs.