Steep declines follow May uptick in June first look

As airports and carriers begin to report June 2019 cargo results, the picture of generally sluggish demand remains unchanged from the previous months. Despite the return to growth of a few Asia Pacific-based carriers during May 2019, almost unanimously, carriers and airports based in the region reported lower traffic in June 2019 compared to the previous year. Based on the June results from the carriers and airports so far reporting, we expect that when IATA and WorldACD publish their analyses in two weeks, we will see worldwide air freight demand down by about 6-8% Turning to the individual results: Asia-Pacific Cathay Pacific reported a 9.7% drop in freight-tonne kilometers (FTKs) for the month of June, to 928 million FTKs. Cargo tonnage was 9.1% lower at 163,977 tonnes. Traffic reported by the Hong Kong-based carrier is down 6.1% year-to-date for the first six months of the year. Ronald Lam, Director Commercial and Cargo, said, “Weakening market sentiment has been impacting our tonnage uplift and yield. With the exception of the Americas, Northeast Asia and mainland China, which had a marginal increase in uplift compared to May, overall volume has seen decline against the previous month and year, with only a short-lived recovery from Asia towards the latter half of June. The outlook for the coming months has not seen signs of volume rebound. We shall further our efforts to maintain a healthy market share by working closely with our forwarders and shippers, and further rationalize our freighter capacity to better match demand.” Singapore Airlines reported June cargo traffic down 2.8% year-over-year to 538 million FTKs, while cargo tonnage was slightly lower, down 0.9% to 99,800 tonnes. Year-to-date, cargo traffic is 5.6% lower at 3.2 billion FTKs. Beijing-based Air China Cargo saw overall cargo traffic drop by 5.8% y-o-y for the month of June, to 397 million FTKs, driven primarily by sluggish demand for international movements. Import and export cargo traffic fell by 7.9%, to 267 million FTKs. The carrier’s domestic traffic meanwhile, was 2.5% lower at 122 million FTKs. Through the first half of the year, Air China’s cargo traffic sits at 2.3 billion FTKs, a 2.2% drop compared to last year. Guangzhou-based China Southern Airlines’ traffic is not in the red yet. Overall traffic year-to-date through June is essentially flat (up 0.2%) at 3.6 billion RTKs following a 3.8% y-o-y drop in June traffic, which fell to 624 million FTKs. Although the carrier’s domestic and regional segments were nearly flat, down 0.4% and up 0.85% respectively, international traffic fell by 4.7%, to 484 million FTKs. Taiwan-based China Airlines reported June cargo traffic down 4.1% to 468 million FTKs, its third-best result of the year. Year-to-date, traffic is 8.7% lower compared to 2018 figures, resulting from weaker February traffic, related in part to pilot strikes earlier this year. The carrier has moved to reduce capacity with available freight-tonne kilometers (AFTKs) down 2.2% y-o-y from June 2018. Regardless of capacity adjustment, load factors are still down 4.7 pp for the month. It should also be noted that yields fell by a slight 1.0% after more than six consecutive months of rising yields. Although the strength of the US Dollar is likely one factor, falling yields are also indicative of softer rates. Taiwan-based EVA Air’s cargo unit saw a dramatic 19.5% drop in June cargo traffic to 315 million FTKs. Lower traffic resulted from the cancellation of 392 flights between 20-28 June after EVA and the union representing its flight attendants failed to reach an agreement and flight attendants went on strike. Flight cancellations continued into July. Year-to-date, EVA’s cargo traffic is 9.7% lower, at 1.81 billion FTKs. Hong Kong International Airport (HKG) reported an 8.6% drop in June cargo throughput to 387,000 tonnes. Year-to-date, tonnage is down 6.7%. Discussing the results, the airport blamed declines on “weaker performance in transshipments and imports, which dropped by 13% and 11%, respectively.” Surprisingly, and in line with Cathay Pacific’s result, the airport identified notable drops in cargo throughput to Southeast Asia and Europe. Shanghai Pudong International Airport Cargo Terminal Co Ltd (Pactl, the biggest handler at Shanghai’s Pudong Airport) reported a June cargo handle of 144,000 tonnes, down 11% from June 2018. Year-to-date PACTl’s throughput is down 10.5% to 829,000 tonnes. Inbound international cargo saw the steepest decline, dropping 16.1% y-o-y to 54,000 tonnes. Europe & Middle East Air France-KLM’s June traffic declined by 3.6% y-o-y to 694 million FTKs. Air France reported the sharper decline at 4.4% for the month to 312 million FTKs and KLM declined by 3.0% to 383 million FTKs. Over the first half, the group’s total cargo activity was up by 0.9% y-o-y to 4.17 billion FTKs. International Airlines Group reported another slight increase in traffic for June. Across the Group, traffic rose by 0.9% y-o-y to 462 million FTKs. Traffic increased at Aer Lingus and Iberia, which both account for a relatively small share of IAG’s overall cargo traffic, and was flat at British Airways, which accounts for most of the Group’s traffic. Over the first half, IAG’s cargo traffic was up 1.1% to 2.8 billion FTKs. Lufthansa Group reported a 3.3% decline in June traffic, which fell to 878 million FTKs. The decline is entirely from Lufthansa Cargo’s Asia-Pacific traffic, which declined 11.4% y-o-y, while all other regions ranged from flat (Americas) to sharply higher (Middle East/Africa). Over the first half of the year, Lufthansa’s cargo traffic was down 2.3% to 5.24 billion FTKs. Turkish Cargo reported a 7.7% y-o-y increase in cargo volumes during June, to just under 125,000 tonnes. For the first half of 2019, cargo volumes are up 8.8% to more than 720,000 tonnes. The carrier’s reported growth has slowed from the double-digit gains in 2017 and 2018 but has still outpaced the overall air cargo market. In a statement, Turkish Cargo said it has “increased its market share to 4.0% from 3.9% across the [air cargo] industry, which shrank by 4.0% … and maintained its position at the 7th rank in the air cargo market.” Frankfurt Airport (FRA) reported a 4.7% drop in June cargo throughput to 174,000 tonnes. For the first six months of the year, throughput was 2.8% lower at 1.065 million tonnes. Although traffic to and from the USA rose for the month, weaker global demand for German exports led to a 7.5% drop in outbound cargo. Schiphol Airport (AMS) saw a 13.7% decline in cargo throughput for the month of June with tonnage of 124,000 tonnes. The precipitous drop was the result of the airport’s continued decline in the number of freighter movements, which were down 17.5% compared to June 2019. Although better utilization of bellyhold capacity on some routes has prevented steeper drops, declines are notable for cargo moving to and from the Far East. Heathrow Airport (LHR) reported a 5.7% y-o-y decline in June cargo throughput to 131,000 tonnes. Year-to-date tonnage was 4.1% lower at 806,000 tonnes. Americas LATAM Cargo’s traffic for June saw a slight increase of 0.4% year-over-year to 278 million RTKs. Year-to-date, traffic is down 0.5%. However, load factors also increased 2.3 percentage points to 55.1% for the month, thanks to a 3.4% y-o-y decrease in available tonne kilometers (AFTKs) for June. Through the first half of 2019, AFTKs decreased by 2.5% Delta Air Lines reported a decline of 13.4%, to about 247 million FTKs). Year-to-date, Delta’s cargo traffic is down by 8.0%.

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