Strong air freight demand in November

The International Air Transport Association (IATA) published data showing that total air cargo traffic was up 6.1%  y-o-y in November, with international traffic up 6.7%, and domestic traffic up 2.6%. This is the eighth consecutive month of year-over-year increases, although five of those eight gains were 1.4% or less, and cargo traffic for the first eleven months of 2013 was up just 1.4% over the same period in 2012.

But despite the fact that the 2012 comparisons are fairly soft (cargo traffic in 2012 was down 1.5% from 2011), it now seems safe to say that we are beginning to see a turnaround in air freight demand. How significant a turnaround remains to be seen, but with the US economy gradually strengthening, and with economic or political meltdown no longer seeming likely in Europe, there is reason to be optimistic.

Another point that should be cause for optimism is that unlike past months when increased traffic flown by carriers in the Middle East barely compensated for declines elsewhere, October and November saw gains reported by carriers from all four of the major regions – Asia/Pacific, Europe, the Middle East, and North America. As can be seen in the chart, carriers based in the Middle East continue to report strong double-digit gains in their traffic, but for the first time in almost two years, these gains are not coming at the expense of carriers from Europe,  Asia, and North America.

However, while demand growth in the last few months has been solid, the long-term picture is still unclear.  Assuming that the trend of recent months continues in December, the growth in air cargo traffic from 2012 to 2013 will be just under 2%. Which is very much in line with the overall compound annual growth rate of 1.7% in the six years since 2007. What lies ahead? We don’t have a reliable crystal ball, but absent some unexpected economic or political upheaval, Cargo Facts expects solid growth over next few years.

Asia-Pacific: Carriers from the Asia-Pacific region reported their cargo traffic up 4.9% in November, well up from the 1.8% growth in October. According to IATA, the expansion was fueled by a rebound in Asian trade volumes and the improving Chinese economy, with stronger demand for Asian manufactured goods in North America and Europe also buoying the growth. In IATA’s words: “The jump in demand among the Asia-Pacific carriers – which account for some 40% of the global market – is a good indicator for the broader air freight improvements in the coming months. For the year through November, the region’s carriers reported cargo traffic down 1.0%.

Middle East: As we have often reported, the rapid expansion of the long-haul fleets of the four big carriers from the Gulf Region – Emirates, Etihad, Qatar, and Saudia – combined with the strategic location of their hubs, has allowed them to take a rapidly increasing share of the traffic flowing on all the major trade lanes connecting Europe, Asia, Africa, and the CIS. This trend continued in November, with the region’s carriers reporting traffic up 16.6% for the month and 13.1% for the year-to-date.

Europe: As the European economy continues its gradual improvement, cargo demand reported by the region’s airlines is improving along with it – up 8.0% y-o-y in November. Not all carriers are benefitting equally, however. As we have previously pointed out, of the big three legacy carriers , only Lufthansa is reporting consistent y-o-y increases in cargo traffic in recent months (up 5.5% in November). Air France-KLM continued its long-term pattern of decline, with traffic down 0.4% in November; and IAG actually reported a small (1.5%) gain after over a year of big declines. However, while carriers like Air France-KLM and IAG may not be doing well, their poor performance has been made up for by gains at other carriers. Turkish Airlines, for example, is expanding its fleet and network in the same way as the big Middle Eastern carriers, and has put a strong emphasis on its cargo operations. Turkish reported its cargo volume up 34.6% in November and 20.5% for the first eleven months of 2013.

North America: The huge amount of US domestic cargo carried by FedEx and UPS makes this region different from all others, but in November North American carriers reported their cargo traffic up 2.5%. Two of the big legacy passenger carriers, Delta and United, reported mid-single-digit gains, while American continued its very strong performance of recent months with November cargo traffic up 16.7%. However, despite the solid gains in October and November, North American carriers reported their cargo traffic down 0.4% for the first eleven months of this year.

Latin America: LATAM, the region’s biggest carrier, reported a 2.3% drop in cargo traffic in October, but IATA nonetheless reported total cargo traffic flown by Latin American carriers almost flat with November 2012. For the first eleven months of 2013, the region’s carriers reported their cargo traffic up 3.2% – the second highest regional growth rate behind only the Middle East.

Africa: After reporting solid growth in the first half of 2013, African carriers have seen their cargo traffic decline in recent months, and the trend continued in November with a 1.2% y-o-y drop for the region’s carriers. However, this is not due to problems with the African economy, as trade volumes for the region continue to increase and local economies are seeing fast growth. Rather, African carriers are losing market share to carriers based in the Middle East, Europe, and Asia. The Gulf-based carriers in particular are offering vast amounts of belly space as they ramp up passenger service to African destinations, and much of the cargo moving into and out of Africa is now flying in 777-300ER and A330 passenger jets operated by carriers such as Emirates, Etihad, and Saudia.

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