Intra-European express: 2020 looks positive

This year is likely to bring further growth after 2019's 6% growth in intra-European cargo aircraft flights. However, growth in aircraft movements and shipment volumes have not led to higher tonnage, an indication that densities are decreasing as business-to-consumer traffic increases.

Historical growth to 2019

Figure 1 provides an overview of domestic, international intra-EU, and international flights to destinations outside the European Union. Lest we forget, Britain was still a member of the EU last year, so is included in data collected by Eurostat. While domestic freight and mail flights have been declining over the past 10 years, intra-European cargo flights have increased over the past years, growing in 2019, 2018 and 2017 by 6%, 2% and 8%, respectively. Measured in 757 equivalents, the growth in 2019 was 6.6% as we saw larger equipment (767s and A330s) increasingly operated on intra-European sectors. In 2019, 737s and 757s accounted for 29% and 22% of aircraft movements, respectively, followed by A300s and 767s, each accounting for around 14% of movements. ATR-42/72 feeder flights accounted close to 9% of all intra-European cargo movements. Following two years of reasonably strong growth, flights to destinations outside the European Union did not grow in 2019. Figure 1 - EU cargo aircraft flights by destination, 2004 - 2019

The growth of tonnage and movement present slightly different pictures, indicating a combination of lower densities, stronger imbalances and lower load factors, depending on the market in question. So while intra-European flights grew by 6%, tonnage only grew 2%. This seems logical given the higher share of low density business to consumer traffic moving in express network. Further, 2019 saw an expansion of dedicated Amazon flying in Europe, but this accounted for only around 1% of total movements by our count. Most European movements are attributable to DHL, FedEx, UPS and the vast array of subcontractors including Star Air, West Atlantic and ASL Aviation Group, to name the largest. Cargo carried on international non-EU services declined by 4%. This includes both traffic carried on freighters and passenger aircraft. Figure 2 provides an overview of tonnage development by market since 2004. Figure 2 - EU freight and mail tonnage, 2004 - 2019

Outlook for 2020

Intercontinental air cargo and intra-European express traffic have been following distinctly different paths. International air cargo has seen strong declines starting in February and March, while imports through to May have been increasingly dominated by PPE trade . As industrial production starts to ramp up again, we should see more traditional supply chain cargo moving by airfreight, although we expect volumes to grow in fits and starts.

The outlook for European express appears to be generally positive. In its recent second- quarter preliminary results presentation, DHL noted that Europe time-definite international (TDI) volumes were in a year-on-year growth territory in June, following declines in March and April, as well as a small decline in May. European TDI volume growth in the first quarter was 1.5% and revenue growth 3.6%. This includes both intra-Europe as well as Europe outbound. If DHL’s results and outlook are a proxy for the overall European express business, this appears to indicate that the segment has remained relatively immune to the pandemic, although the mix of B2B and B2C has undoubtably changed over the last months. From an air perspective, we expect most intra-European growth to center around hubs in Cologne and Leipzig, and less so out of Liege, Paris and the East Midlands.

Our Express Market Outlook from November 2019 includes a five-year forecast of European express volumes prepared prior to the pandemic. It foresees annual average intra-European express traffic increasing by 3.4% per year until the end of 2024. We plan to prepare an updated edition later this year.

Intra-European express: 2020 looks positive

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