2012: The year that wasn’t

In its most recent statistical report, covering 2012 through November, the International Air Transport Association poured a bit of cold water onto the idea that the modest increase in cargo traffic that month signaled the beginning of a major recovery. With December results from many of the world’s major cargo carriers and airports now available (see chart at right), it appears that IATA was right to be somewhat pessimistic.

This is not to say that there is no good news, but rather that results continue to be mixed, with reports of gains balanced by a similar number of  reports of declines. Our best guess is that once all the numbers are in, total cargo traffic for 2012 will be down about 1.5% from 2011. But whatever the final tally is once all the data from Decmember are available, the overall trends for the year are clear. (Details about individual carriers and airports are included at the end of this post.)

First, and most important, is the state of the world economy. A combination of continuing economic and political problems in the European Union, and a very slow recovery in the US, has driven down demand for consumer goods, and demand for consumer goods is one of the big drivers of demand for air freight. However, the Asia-Pacific region as a whole continued to see reasonably good economic growth in 2012, and while the US recovery may have been slow, it has still been a recovery. The net effect? Very little change from 2011. Perhaps it is a stretch to call “very little change” a trend, but if there was one defining characteristic of the airfreight business in 2012, it was that it had no defining characteristics. A year that wasn’t.

A second major trend has been the continued growth of cargo volume for both carriers and airports in the Middle East (and Turkey). But the key point here is that the pie is not growing, so if carriers and airports in the Middle East are getting a bigger slice, it means other carriers and airports elsewhere are going hungry. To some extent, this is a result of geography. The Middle East is ideally suited to be a hub for traffic in the huge region that includes Asia, Europe/Russia, and Africa. And with the increasing range of today’s jets, and the massive networks being developed by carriers like Emirates, this is not going to change.

A third trend – that may in retrospect be seen as more important than it seemed during 2012 – is the shift of cargo from the main decks of freighter aircraft to the bellies of the newer, more cargo-friendly widebody passenger aircraft. We have analyzed this in detail in previous issues of Cargo Facts and will not repeat that analysis here, but as more and more new widebodies are put into service in bigger networks, they will inevitably take cargo away from freighters – especially if there is a continuation of the current trend of passenger demand growing more rapidly than freight demand.

A fourth trend that continued in 2012 is the move of the big integrators into the general freight market. DHL, FedEx, and UPS are all actively participating in this market, and all three are building their forwarding businesses.

Finally, the uphill battle fought by all-cargo carriers in the last few years did not get any easier in 2012. The reasons for this are rooted in the first four trends, above, with high fuel prices a contributing factor. If a carrier like Cargolux is in trouble, what does that bode for smaller players without the financial resources of the Grand Duchy of Luxembourg?

We believe that these trends will continue through 2013, with the key being the world economy. If the eurozone can resolve its sovereign debt problems, the US can focus its considerable resources on something other than political partisanship, and if violence does not consume the Middle East, then there is a good prospect of recovery for the air freight industry. Needless to say, this a series of very significants “ifs.”

Detailed 2012 traffic statistics by carrier and airport

Asia Pacific

Cathay Pacific reported December cargo traffic up 0.4% y-o-y to 850,000 RTKs. This is just the second month this year (following November) that Cathay has reported a year-over-year increase in cargo traffic (in revenue tonne kilometers), although it is the fourth consecutive month in which the carrier has seen cargo volume (in tonnes) increase over 2011. In discussing the result, the carrier’s General Manager Cargo Sales & Marketing James Woodrow said: “The cargo market had been in the doldrums since April 2011, so it was good to see the year ending on a stronger note. However, the cargo and mail tonnage carried in 2012 was still some way behind the 2010 total.” He also pointed out that Cathay operated close to a full freighter schedule in December after having flown a reduced schedule for much of the year. For the full year 2012, Cathay’s cargo traffic was down 7.3% to 8.94 billion RTKs.

Hong Kong Air Cargo Terminals (Hactl, which handles over 70% of the cargo at Hong Kong International) reported its December handle up 7.7% y-o-y to 240,000 tonnes, with solid growth in both export volumes (up 5.9% to 131,000 tonnes) and import volumes (up 4.6% to 62,000 tonnes. The increasingly import category of transshipment volumes jumped 14.7% to 57,000 tonnes. This is Hactl’s biggest-ever December handle, and the third-highest handle of any month – almost identical with the preceding month of November and just 1.0% below the previous record of 261,000 tonnes set in October 2010. For the full year 2012, Hactl’s handle was up 2.3% to 2.78 million tonnes, with the gain coming entirely from an 11.2% increase in transshipment volume to 595,000 tonnes. Export volume for the full year was flat with 2011 at 1.44 million tonnes, while imports declined 1.6% to 678,000 tonnes.  The full year total is not a record – being 4.0% below the 2.89 million tonnes handled in 2010 – and in fact is only 5.9% above 2007. This is an growth rate of less than 1% per year over the last five years.

Beijing-based Air China reported December cargo traffic up 13.9% y-o-y to 408 million RTKs. The gain was driven by increases in both international traffic (up 14.3% to 308 million RTKs) and domestic traffic (up 12.3% to 92 million RTKs). For the full year, Air China’s cargo traffic was up 3.1% to 4.55 billion RTKs.

Shanghai-based China Eastern Airlines reported December cargo traffic down 6.2% y-o-y to 400 million RTKs as both international and domestic traffic fell by similar amounts. For the full year 2012, China Eastern’s cargo traffic was up 6.8% to 4.72s billion RTKs.

Guangzhou-based China Southern Airlines reported December cargo traffic up 16.5% y-o-y to 357 million RTKs, led by a 27.2% jump in international traffic to 224 million RTKs. Domestic traffic was up just 1.8% to 131 million RTKs. For the full year, China Southern’s cargo traffic was up 14.9% to 4.12 billion RTKs.

Shanghai Pudong International Airport Cargo Terminals Co. Ltd (Pactl, the biggest cargo handler at PVG) reported its December handle flat with December 2011 at 105,000 tonnes. International volume was up 1.0% for the month to 98,000 tonnes, while the much smaller domestic volume was down 10.8% to 8,000 tonnes (most of Shanghai’s domestic cargo moves through nearby Hongqiao Airport). For the full year, Pactl’s handle was down 3.4% to 1.25 million tonnes.

Singapore Airlines continues to report declining demand, with December cargo traffic down 8.0% to 565 million RTKs. For the full year, SIA’s cargo traffic was down 5.7% to 6.84 billion RTKs.

Europe & Middle East

Lufthansa Cargo reported its December traffic down 9.0% y-o-y to 678 million RTKs. The carrier has reported declines in the mid-to-high single digits for most months of this year, but experienced a boost in November when cargo traffic was almost flat with November 2011. That now appears to have been an anomoly, with a strong swing back into negative territory in December. For the Lufthansa Group as a whole, December cargo traffic was down 6.4% to 809 million RTKs. For the full year Lufthansa Cargo’s traffic was down 8.0% to 8.75 billion RTKs, while Group cargo traffic was somewhat better off, down 6.1% to 10.20 billion RTKs. As we noted last month, Lufthansa is forecasting modest cargo growth in 2013, but given that this “growth” will be measured against a very soft 2012, it may be very modest indeed.

Air France-KLM reported December traffic down 5.7% y-o-y to 880 million RTKs, with the biggest decline on Asia-Pacific trade lane, which was down 13.0% to 321 million RTKs. Traffic to/from the Americas was down 2.0% to 364 million RTKs. and the trans-Atlantic lane down 3.2% to 361 million RTKs. The carrier reported a cargo capacity reduction of 5.2% for the month, while passenger capacity was up slightly, clearly implying that AF-KLM is reducing its main-deck operations. For the year through November, AF-KLM’s cargo traffic was down 6.4% to 9.70 billion RTKs.

International Airlines Group (IAG, parent of British Airways and Iberia) reported December cargo traffic down 4.0% y-o-y to 506 million RTKs. As has been the case since the BA/Iberia merger, the monthly decline hides a considerable difference in the performance of the two carriers. BA’s cargo traffic in December was actually down 2.0% to 396 million RTKs, while Iberia continued to report double-digit declines – down 10.6% in November to 110 million RTKs. For the year through November, IAG Cargo’s traffic was down 1.2% to 6.08 billion RTKs.

Turkish Airlines continued to report results that seem to come from another universe, with November cargo volume up 25.6% y-o-y to 44,000 tonnes. For the full year 2012, Turkish’s cargo volume was up 24.6% to 462,000 tonnes.

Frankfurt Airport (FRA) reported its December freight handle down 1.6% y-o-y to 172,000 tonnes, leaving November as the only month of 2012 in which FRA reported a y-o-y increase in cargo volume.. For the full year, FRA’s handle was down 6.7% to 2.07 million tonnes. 2012 is the second straight year of declines for Frankfurt, and the 2.07 million tonnes handled is in fact 3.3% below the airport’s 2007 handle. While these declines can be partly attributed  to the deteriorated economic situation in the eurozone, but the imposition of a ban on night flights at FRA has also played a role.

London’s Heathrow Airport (LHR) reported its December handle down 3.5% y-o-y to 120,000 tonnes. For the full year 2012, LHR reported its handle down 1.3% to 1.46 million tonnes.

Americas

LATAM Airlines Group (parent of LAN and TAM), reported December cargo traffic up 3.% y-o-y to 428 million RTKs. The company said the increase in traffic was the result of stronger seasonal demand compared to December 2011, partially offset by continued weakness in imports into Latin America. For the full year, LATAM reported cargo traffic down 2.4% to 4.49 billion RTKs.

United Airlines reported December cargo traffic down 10.9% y-o-y to 291 million RTKs. For the full year, United’s cargo traffic was down 7.0% to 3.59 billion RTKs.

Delta Air Lines reported December cargo traffic down 2.2% y-o-y to 282 million RTKs. For the full year, Delta’s cargo traffic was up 0.5% to 3.48 billion RTKs.

American Airlines reported December cargo traffic up 3.7% y-o-y to 218 million RTKs. While not a huge gain, this is the strongest growth reported by any of the big US combination carriers in recent months. For the full year, American’s cargo traffic was down 1.2% to 2.57 billion RTKs.