First signs of Peak Season?

Many of the world’s major cargo carriers and handlers have now reported their August results, and Cargo Facts expects that once data from the big Middle East carriers is available, we will see a modest year-over-year gain in worldwide airfreight demand for the month. But more important than a small overall gain in August – which was expected by many observers – is that early reports indicate strengthening demand in September, with some executives now saying that they expect a real peak this year.

James Woodrow, Director Cargo at Cathay Pacific was recently quoted in The Loadstar as saying: “We are certainly seeing improved volumes transpacific, and rates are starting to move up. Manufacturing ex-China is improving and this is translating into improved volumes. This is helping move the ex-Hong Kong rates up to peak season levels.” However, we point out that while demand may be increasing, capacity discipline also plays a big part in driving up rates, and If carriers rush to put parked freighters back into service, pricing power will quickly erode.

As we have said for over a year now, most economic indicators point to a slight recovery in late 2013, strengthening in 2014. Whether or not these “economic indicators” will prove trustworthy remains to be seen, but the August results, as shown in the chart above, continue the trend of slight improvement seen in June and July and we expect that once all data are in, worldwide air freight traffic will be up about 2% over August 2012. But the real key is what happens in the last four months of the year.

A detailed analysis of the cargo performance of some of the major carriers and airports in August follows below…

Asia Pacific

Cathay Pacific Airways reported August cargo traffic up 1.4% y-o-y to 712 million RTKs, its first year-over-year gain in 2013, and reversing the general trend of declining demand that has been in place for over a year. For the year-to-date through August, Cathay’s cargo traffic was down 3.4% to 5.55 billion RTKs. Discussing the August results, Cathay Pacific General Manager Cargo Sales & Marketing Mark Sutch said: “There was no real change in the market situation in August and demand was dampened further by holidays in various destinations across our network. The Europe and North Asia markets remained particularly soft, though demand on transpacific flights held up reasonably well thanks in part to the shipment of perishables.”

Hong Kong International Airport reported its August cargo handle up 2.7% y-o-y to 337,000 tonnes, with import volume up 2.4% to 122,000 tonnes and export volume up 2.9% to 215,000 tonnes. Regarding the positive performance, Airport Authority CEO Stanley Hui Hon-chung said: “Recent economic data suggests a slow recovery in manufacturing activities in China, as well as trade with key trading partners.  Shipping freight rates have increased on some routes with rising demand expected over the coming seasonal peak months.  We therefore remain cautiously optimistic regarding cargo performance in the near future.” For the year through August, HKIA’s cargo handle was up 2.1% to 2.6 million tonnes.

Hong Kong Air Cargo Terminals (Hactl) reported its August handle down 17.2% y-o-y to 188,000 tonnes, but both the tonnage and the y-o-y percentage change are effectively meaningless, because Cathay Pacific (long Hactl’s biggest customer by far) has begun handling an increasing amount of its own cargo at the terminal it opened earlier this year. As noted above, Hong Kong International Airport reported its August handle up almost 3% in August, and that, rather than Hactl’s handle is what gives a true picture of cargo activity in Hong Kong. For the year-to-date through August Hactl’s handle was down 3.6% to 1.72 million tonnes.

Beijing-based Air China reported August  cargo traffic down 3.7% y-o-y to 426 million RTKs. International traffic was down 2.5% to 304 million RTKs, and domestic traffic was down 4.7% to 115 million RTKs. This follows a slight decline in July and reverses Air China’s positive trend of earlier months, but  the carrier nonetheless reported cargo traffic for the first eight months of this year up 2.6% to 3.23 billion RTKs.

Shanghai-based China Eastern Airlines reported August cargo traffic up 2.6% y-o-y to 409 million RTKs. International traffic was up 2.4% to 318 million RTKs, while domestic traffic was up 2.9% to 80 million RTKs. For the year through August, China Eastern’s cargo traffic was up 1.8% to 3.13 billion RTKs.

Guangzhou-based China Southern Airlines reported August cargo traffic up 4.3% y-o-y to 371 million RTKs. International traffic was up 3.4% to 242 million RTKs, and domestic traffic was up 6.9% to 128 million RTKs. For the first eight months of 2013 China Southern’s cargo traffic was up 2.7% to 2.73 billion RTKs.

Shanghai Pudong International Airport Cargo Terminals Co. Ltd (Pactl, the biggest cargo handler at PVG) reported its August handle down 0.7% y-o-y to 105,000 tonnes. International volume was down 1.5% to 99,000 tonnes, while the much smaller domestic volume rose 11.0% to 7,000 tonnes (most of Shanghai’s domestic cargo moves through nearby Hongqiao Airport). For the first eight months of 2013, Pactl’s handle was up 0.7% to 813,000 tonnes.

Singapore Airlines continued an almost two-year trend of declining demand, reporting August cargo traffic down 5.7% y-o-y to 541 million RTKs. For the first eight months of 2013 SIA’s cargo traffic was down 5.5% to 4.30 billion RTKs.

Europe & Middle East

Lufthansa Cargo reported its August traffic up 1.7% y-o-y to 710 million RTKs. This is the fourth consecutive month of positive results for the carrier. For the Lufthansa Group as a whole, August cargo traffic was up 2.0% to 840 million RTKs. While the overall gain was relatively modest, Lufthansa reported very strong growth in air freight demand to/from the Asia-Pacific (up 7.4% to 384 million RTKs). Trans-Atlantic traffic, however, declined 1.3% to 357 million RTKs, and traffic to/from the Middle East/Africa was down 7.7% to 68 million RTKs. For the first eight months of 2013, Lufthansa Cargo’s traffic was down 1.7% to 5.70 billion RTKs, while Group cargo traffic was down 1.1% to 6.72 billion RTKs.

Air France-KLM continued to report declining cargo demand, although the August drop of 1.3% y-o-y to 847 million RTKs is a considerable improvement over recent months. Traffic was down on all but one of the major trade lanes, with the Asia-Pacific the lone exception (up 0.4% to 334 million RTKs). For the year-to-date through August, AF-KLM’s cargo traffic was down 5.6% to 6.63 billion RTKs.

International Airlines Group (parent of British Airways and Iberia) reported August cargo traffic down 7.3% y-o-y to 459 million RTKs. Both subsidiary carriers reported declines, with BA down 5.4% to 385 million RTKs and Iberia down 15.9% to 74 million RTKs. For the first eight months of 2013 IAG’s cargo traffic was down 8.3% to 3.68 billion RTKs.

Turkish Airlines continues to report exceptionally strong results, with August cargo volume up 22.3% y-o-y to 45,000 tonnes. For the first eight months of 2013, Turkish reported cargo volume up 16.8% to 357,000,000 tonnes.

Frankfurt Airport (FRA) reported its August freight handle up 1.7% y-o-y to 171,000 tonnes, continuing a trend of small gains and small declines that began in January. Overall, however, the trend has been slightly positive and for the first eight months of 2013, FRA’s handle was up 0.8% to 1.37 million tonnes. However, while the year-to-date handle is up slightly over 2012, it is still slightly below 2007 – that is, FRA is handling less freight now than it did six years ago.

London’s Heathrow Airport (LHR) reported its August handle down 6.0% y-o-y to 114,000 tonnes. For the year-t-date through August, LHR’s handle was down 4.4% to 931,000 tonnes.

Americas

As has been the case for the last two months, only one of the four big non-express carriers in the Americas – American Airlines – reported a gain in August. The other three saw cargo traffic decline from 1.2% (LATAM) to 16.5% (United).

LATAM Airlines Group (parent of LAN and TAM), reported August cargo traffic down 1.2% y-o-y to 350 million RTKs. The company said the decline in traffic came was “driven by weaker imports into Latin America.” For the first eight months of 2013, LATAM’s cargo traffic was up 0.9% to 2.92 billion RTKs.

United Airlines reported August cargo traffic down 16.5% y-o-y to 237 million RTKs. For the year through August, United’s cargo traffic was down 12.8% to 2.11 billion RTKs.

Delta Air Lines reported August cargo traffic down 1.9% y-o-y to 295 million RTKs. For the first eight months of the year, Delta’s cargo traffic was down 3.2% to 2.25 billion RTKs.

American Airlines reported July cargo traffic up 5.7% y-o-y to 220 million RTKs. For the year through August, American’s cargo traffic was down 0.4% to 1.73 billion RTKs.