Europe’s big three carriers miss out on June cargo

Airlines in Asia, the Middle East, and North America are mostly reporting solid year-over-year increases in cargo traffic in June. Likewise, handlers at Asia’s big cargo airports are reporting strong volume growth, as are some of the European airports that have so far reported. But Air France-KLM, Lufthansa, and IAG all saw their cargo traffic decline.

A detailed analysis of the June results for individual carriers and airports follows below, but the year-over-year June data in the chart at right paint a clear picture of continuing growth in worldwide air freight demand.

However, that demand is being met unevenly, with the big European carriers losing market share to competitors from other regions. We expect that when IATA and WorldACD publish their comprehensive June traffic reports, they will show strong overall growth. So what is happening to the big three European carriers? Air France-KLM and Lufthansas are traditionally among the top cargo carriers in the world. Why are they struggling in a period of increasing air freight demand worldwide?

Now, the details:

Asia Pacific

Cathay Pacific Airways reported June cargo traffic up 16.0% y-o-y to 817 million RTKs. After a flat year-over-year performance in January and February, Cathay reported jumps of 19.3%. 17.0%. and 17.5% in March, April, and May, and the carrier’s cargo traffic for the first half of 2014 was up 12.1% to 4.62 billion RTKs. Commenting on the June traffic report, Cathay Pacific General Manager Cargo Sales & Marketing Mark Sutch said: “The upswing in cargo demand seen in May continued through into June, with a surge towards the end of the month as shippers rushed to meet month-end and quarter-end deadlines. Demand remained robust out of Hong Kong and Mainland China, particularly on the trans-Pacific lanes. Shipments of perishable items continued to boost load factors out of North America back into Asia, while Europe benefited from higher-yield shipments of specialized products.”

Beijing-based Air China reported June cargo traffic up 4.9% y-o-y to 453 million RTKs, a return to the solid growth reported earlier in the year after a slight dip in May. International traffic in June was up 6.4% to 333 million RTKs while domestic traffic was down 0.3% to 110 million RTKs. For the first half of this year, Air China’s cargo traffic was up 8.4% to 2.56 billion RTKs.

Guangzhou-based China Southern Airlines  reported another month of exceptional air freight demand growth, with June cargo traffic up 25.9% y-o-y to 411 million RTKs. International traffic leaped 35.8% to 292 million RTKs, while domestic traffic was up 6.6% to 117 million RTKs. For the year through May, China Southern’s cargo traffic was up 15.9% to 2.32 billion RTKs.

Shanghai-based China Eastern Airlines reported June cargo traffic down 4.5% y-o-y to 396 million RTKs, the third consecutive month of negative growth after a promising first quarter. International traffic was down 3.4% to 321 million RTKs, while domestic traffic was fell sharply (10.5%) to 65 million RTKs. For the first half of 2014, China Eastern’s cargo traffic was up flat with 1H13 at 2.29 billion RTKs.

Shanghai Pudong International Airport Cargo Terminals Co. Ltd (Pactl, the biggest cargo handler at PVG) reported its June handle up 12.4% to 108,000 tonnes. This follows a 13.9% jump in April and a 13.4%, increase in May, continuing the trend of strong growth seen in the first quarter of this year. For June, Pactl’s international volume was up 13.4% to 101,000 tonnes, while the much smaller domestic volume was down 1.8% to 7,000 tonnes (most of Shanghai’s domestic cargo moves through nearby Hongqiao Airport). For the first half of 2014, Pactl’s handle was up 13.8% to 604,000 tonnes.

Hong Kong Air Cargo Terminals (Hactl) reported its first-half handle, adjusted for the loss of Cathay Pacific’s business last year, up 11.5% y‑o‑y to 869,000 tonnes. Without the adjustment, Hactl’s handle would have been down 34.5%. The adjusted growth was led by a 34.2% jump in transshipment volume to 65,000 tonnes, while import volume was up 13.6% to 243,000 tonnes and export volume rose 8.8% to 490,000. Hactl now also reports “Other” volume (including mail, express, and on-board courier shipments), which turns out to be fairly significant – 71,000 tonnes in the first half, up 6.5% over 1H13. Discussing the first-half results, Hactl CEO Mark Whitehead said: “When we parted company with Cathay Pacific in 2013, we expected a long uphill struggle to replace this significant element of our business. In reality, we have quickly made up a substantial proportion of the traffic through new account wins, and organic growth among our 100 airline clients.” Regarding the big jump in transshipment volumes, he added: “The growth in our transshipment traffic – while currently still the smallest part of our business – is very interesting, as it reflects the continuing development of Hong Kong as the preferred regional transshipment hub. The transshipment result is also gratifying, as it rewards our recent drive to promote Hacis, our added-value logistics arm. This provides scheduled road feeders into and out of mainland China, which more and more carriers are using as a safe platform to extend their reach beyond Hong Kong.”

Singapore Airlines reported June cargo traffic down 3.7% y-o-y to 530 million RTKs, returning to it’s long-term trend of mid-single-digit declines after almost, but not quite, reporting  a positive result in May. For the first six months of 2014, SIA’s cargo traffic was down 3.8% to 3.09 billion RTKs.

Europe & Middle East

Lufthansa Cargoreported June traffic down 6.9% y-o-y to 721 million RTKs. For the Lufthansa Group as a whole, June cargo traffic was down 5.5% to 856 million RTKs. For the first half of 2014, Lufthansa Cargo’s traffic was down 1.9% to 4.16 billion RTKs, while Group cargo traffic was down 0.8% to 4.96 billion RTKs. Following the release of its June traffic report, Lufthansa also issued a warning that full-year operating profit would be lower than previously forecast due to “weaker than expected revenue development in the passenger and freight businesses as well as negative result impacts from strikes and the devaluation of the Venezuelan Bolivar.”

Air France-KLM reported June cargo traffic down 4.3% y-o-y to 800 million RTKs. Traffic was down on all three of the carrier’s main trade lanes: down 5.4% on the Asia-Pacific lane to 309 million RTKs, down 4.3% on the Africa/Middle East lane to 123 million RTKs, and down 3.4% on the trans-Atlantic lane to 330 million RTKs. The June result ends the trend of very small gains and declines seen so far this year, leaving the carrier’s cargo traffic for the first half of 2014 flat with 1H13 at 4.93 billion RTKs.

International Airlines Group reported June cargo traffic down 4.3% y‑o‑y to 443 million RTKs. Subsidiary carriers British Airways reported its June traffic down 3.1% to 371 million RTKs. Given that British Airways returned all three of the 747-8Fs it leased from Atlas Air in early April, and switched to a block-space deal with Qatar Airways involving a single 777F, the fact that BA’s cargo traffic in May and June was down just 2.1% and 3.1%, respectively, after the loss of that much main-deck capacity gives a fairly clear picture of why the carrier was keen to terminate the leases on the three jumbo freighters. For the first half of 2014, IAG’s cargo traffic was down 2.3% to 2.69 billion RTKs.

Turkish Airlines continues to report exceptionally strong results, with June cargo volume up 20.3% y‑o‑y to 57,000 tonnes. For the first half of this year, Turkish’s cargo volume was up 24.9% to 327,000 tonnes.

Etihad Airways reported June cargo volume up 14.2% y-o-y to 47,000 tonnes. For the first half of 2014, Etihad’s cargo volume was up 25.0% to 269,000 tonnes. While 47,000 tonnes is a new record for the month of June, the 14.2% year-over-year increase is considerably smaller than the 25%-to-30% increases the carrier reported in the first five months of the year. Whether this means that Etihad’s cargo business has become big enough that huge gains are no longer possible, or whether June was, for whatever reason, an unusual month for the carrier remains to be seen. We suspect it is a mix of both factors, but that the rate of growth will likely slow going forward, just as it did for Etihad’s neighbor Emirates. But growth at 14% is still far stronger than what is being reported by most of Etihad’s competitors in Europe and Asia, and indicates that carriers based in the Middle East are still gaining market share. Also worth noting is that the gains in volume and market share do not appear to be coming at the expense of yield, as Etihad reported its first-half cargo revenue up 27%, more than matching the 25% growth in volume

Frankfurt Airport (FRA) reported its June cargo handle down 3.5% y-o-y to 178,000 tonnes. For the first half of 2014, FRA’s handle was up 2.2% to 1.06 million tonnes.

London’s Heathrow Airport (LHR) reported its June handle up 4.7% y-o-y to 125,000 tonnes. For the first half of this year, LHR’s handle was up 4.1% to 728,000 tonnes.

Americas

LATAM Airlines Group reported June cargo traffic down 5.1% y-o-y to 328 million RTKs, continuing a year-long trend of declining cargo traffic. Commenting on the result, the company said the fall in traffic was “driven by weaker imports into Latin America.” For the first half of the year, LATAM’s cargo traffic was down 4.2% to 2.12 billion RTKs.

United Airlines reported June cargo traffic up 7.2% to 296 million RTKs. This marks the eighth month of a turnaround that started in November 2013. Prior to that point, United had for some time been reporting what may have been the worst results for any major cargo carrier in the world. Its cargo traffic for the first ten months of 2013 was down over 12% from 2012, and 2012 itself was a terrible year. Compare that to 2014, in which United’s cargo traffic was up 6.2% to 1.74 billion RTKs.

Delta Air Lines reported May cargo traffic up 5.9% y-o-y to 303 million RTKs. For the first half of 2014, Delta’s cargo traffic was down 0.9% to 1.65 billion RTKs.

American Airlines (now including US Airways) reported June cargo traffic up 1.2% to 282 million RTKs. As is the case with United, this is a continuation of a trend of growth, although for American the growth began earlier and has been stronger, and June’s 1.2% increase is the weakest result since the carrier began reporting positive results in May 2013. For the first half of 2014, American’s cargo traffic was up 9.1% to 1.69 billion RTKs.