Lunar New Year holiday drives down air freight demand in February

Updated 21 March: China Southern Airlines February cargo traffic was down 18%, but its strong performance in January means the carrier’s cargo traffic was up 10% for the two-month period

The timing of the Lunar New Year holiday in Asia, particularly in China, can make year-over-year comparisons for the months of January and February completely meaningless. The current situation is a perfect example: In 2012, the New Year holiday fell in January, which meant that many factories in China were closed for a full week, producing nothing that could be shipped. This meant that Chinese carriers and airports reported fairly weak cargo volumes. But when the factories reopened, they pumped out their products at a high rate to make up for the lost week, which meant that cargo volumes surged in February. Fast forward to 2013, and you find the opposite situation. The New Year holiday fell in early February, so output was increased in January, and shippers moved as much as they could in January to ensure that inventories were sufficient to cope with the shutdown in February. The result, needless to say, is that year-over-year comparisons for many airlines and airports – particularly those in Asia – show a significant year-over-year jump in January, followed by a big drop in February.

To a lesser extent, this pattern hits European and North American carriers as well, because a significant amount of their cargo traffic is made up exports from China to their home regions. The big exception, though, is the Middle East. Turkish Airlines (which straddles the divide between Europe and the Middle East) reported a 20% year-over-year gains in both January and February. And while we haven’t yet seen reports of data from the Gulf region, anecdotal evidence indicates that carriers and airports there will continue to report strong gains despite the overall low growth in air freight demand, as they continue to take market share from the traditional big players in Asia and Europe.

Looking at the results in the chart at right and the reports from individual carriers and airports below, our sense is the there was a modest (likely low-single-digit) increase in demand in the combined January/February period in 2013 compared to 2012.

Asia Pacific

Hong Kong Air Cargo Terminals (Hactl, which handles about 70% of the cargo at Hong Kong International) reported its February handle down 12.0% y-o-y to 169,000 tonnes. While this might appear to be a significant drop in cargo volume, we point out that the Lunar New Year holiday fell in January in 2012 but in February in 2013. So, with factories closed for a week in January 2012, volume was considerably below normal, but jumped strongly in February. However, this year shippers were pushing out extra volume in January, then shipped much lower volumes in February when factories were closed for a week. The true measure of air freight demand at HKG for the first two months of 2013 is shown by the two-month total, which was up 4.7% over the same two months in 2012 to 398,000 tonnes. While this is Hactl’s highest-ever total for the first two months of the year, it is up just 1.0% over 2011, and up at an annual rate of just 1.7% per year in the six years since 2007. For the two-month period, export volume was up 0.4% to 192,000 tonnes, import volume was up 2.7% to 97,000 tonnes, and the increasing import category of transshipment volumes jumped 29.9% to 58,000 tonnes.

Cathay Pacific Airways reported February cargo traffic down 14.9% y-o-y to 574 million RTKs. For the combined January-February period, Cathay’s cargo traffic was down 3.6% to 1.30 billion RTKs. The carrier’s General Manager Cargo Sales & Marketing James Woodrow said: “There was no pre-Chinese New Year rush to speak of out of Mainland China and Hong Kong, and what demand there was in the market fell away as China’s factories closed. The pick-up following Chinese New Year was slower than expected. Demand on the key trade lanes to Europe and the Americas remained sluggish throughout February and we cut back our freighter schedule accordingly, though trade within the region saw a quicker rebound.” With demand falling, Cathay parked its last remaining 747-400BCF in February, leaving it with eight 747-8Fs, six 747-400ERFs and six 747-400Fs. This, combined with schedule adjustments, allowed the carrier to reduce cargo capacity  by 8.3% in February to 939,000 ATKs, but with the 14.9% fall in traffic, cargo load factor declined 4.7 percentage points to 61.1%.

Shanghai-based China Eastern Airlines reported February cargo traffic down 19.3% y-o-y to 280 million RTKs as both international and domestic traffic fell by similar percentages. International traffic fell 19.3% to 221 million RTKs, domestic traffic fell 19.0% to 52 million RTKs, while the much smaller regional traffic (Hong Kong and Macaul) fell 17.0.0% to 11 million RTKs. For the combined January/February period, China Eastern’s cargo traffic was almost flat with 2012, up just 0.2% to 661 million RTKs.

Beijing-based Air China reported February cargo traffic down 15.5% y-o-y to 264 million RTKs. International traffic was down 12.7% to 183 million RTKs, while domestic traffic fell 20.7% to 76 million RTKs. However, the decline in February was not as big as the gain in January, and for the first two months of 2013, Air China’s cargo traffic was up 2.2%.

Guangzhou-based China Southern Airlines reported February cargo traffic down 18.4% y-o-y to 234 million RTKs. International traffic was down 15.7% to 159 million RTKs, while domestic traffic fell 23.4% to 74 million RTKs. However, given China Southern’s strong performance in January, traffic for the two-month period was up 9.9% to 593 million RTKs.

Shanghai Pudong International Airport Cargo Terminals Co. Ltd (Pactl, the biggest cargo handler at PVG) reported its February handle down 14.8% y-o-y to 96,000 tonnes. International volume was down 15.2% for the month to 69,000 tonnes, while the much smaller domestic volume was down 8.6% to 5,000 tonnes (most of Shanghai’s domestic cargo moves through nearby Hongqiao Airport). For the combined two-month period, Pactl’s handle was up 0.9% to 170,000 tonnes.

Singapore Airlines reported February traffic down 14.1% to 466 million RTKs. The carrier said the decline “resulted from a seasonal slowdown in airfreight activities across the Lunar New Year holidays.” The decline was in fact substantially greater than the seasonal boost the carrier received in January, and SIA’s cargo traffic for the two-month period was down 5.9% to 978 million RTKs.

Europe & Middle East

Lufthansa Cargo reported its February traffic down 11.2% y-o-y to 627 million RTKs. For the Lufthansa Group as a whole, January cargo traffic was down 9.2% to 746 million RTKs reflecting the impact of modest growth (3.3%) at subsidiary SWISS. For the January/February period, Lufthansa Cargo’s traffic was down 8.3% to 1.21 billion RTKs, while Group cargo traffic was down 6.2% to 1.45 billion RTKs, continuing the trend of mid-to-high single-digit declines reported throughout 2012.

Air France-KLM reported February cargo traffic down 4.3% y-o-y to 763 million RTKs. Traffic to/from the Americas was down 1.8% to 327 million RTKs, but this was nowhere near enough to overcome a 14.6% drop in traffic on the Asia-Pacific trade lane to 267 million RTKs. The February decline was only slightly greater than that reported in January, and for the two-month period AF-KLM’s cargo traffic was down 3.6% to 1.54 billion RTKs.

International Airlines Group (IAG, parent of British Airways and Iberia) reported January cargo traffic down 8.2% y-o-y to 434 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 January was down 4.5% to 359 million RTKs – a bad enough result – but Iberia, which has reported low-double-digit declines through most of 2012, saw a 22.7% drop in February to just 75 million RTKs (following a 17.0% fall in January). For the January/February period, IAG’s cargo traffic was down 8.0% to 865 million RTKs.

Turkish Airlines continued to report results that other European carriers can only dream of, with February cargo volume up 19.9% y-o-y to 39,000 tonnes. Turkish seems to have been relatively unaffected by the Asian Lunar New Year holiday, and cargo volume for the first two months of 2013 was up 20.8% to 75,000 tonnes.

Frankfurt Airport (FRA) reported its February freight handle down 3.4% y-o-y to 153,000 tonnes. For the first two months of 2013, FRA’s handle was down 1.3% to 301,000 tonnes. This follows two months in which the airport reported small gains, which in turn followed seventeen straight months of decline. While these declines can be partly attributed  to the deteriorated economic situation in the eurozone, the imposition of a ban on night flights at FRA has also played a role. Whatever the reason for the declines, Frankfurt Airport’s handle in the first two months of 2013 is 3.2% lower than the same period in 2007 – six years ago!

London’s Heathrow Airport (LHR) reported its January handle down 4.3% y-o-y to 111,000 tonnes. For the January-February period, LHR’s handle was down 4.8% to 217,000 tonnes. Through the last half of 2012, LHR reported some low-single-digit declines and some low-single-digit gains, so the January/February 2013 result is a not out of line with the recent trend.

Americas

LATAM Airlines Group (parent of LAN and TAM), reported February cargo traffic up 0.6% y-o-y to 344 million RTKs. The company said the increase in traffic was the result of strong export demand, somewhat offset by continued weakness in imports into Latin America. For the first two months of 2013, LATAM’s cargo traffic was down 0.3% to 691 million RTKs.

United Airlines reported February cargo traffic down 15.7% y-o-y to 248 million RTKs. For the first two months of the year, United’s cargo traffic was down 13.8% to 497 million RTKs.

Delta Air Lines reported February cargo traffic down 3.5% y-o-y to 261 million RTKs. For the first two months of the year, Delta’s cargo traffic was down 1.5% to 517 million RTKs.

American Airlines reported February cargo traffic down 10.2% y-o-y to 184 million RTKs. For the first two months of the year, American’s cargo traffic was down 9.8% to 364 million RTKs.