September: How good is “less bad”?

Update as of 30 October:Dubai Airports, which operates both Dubai International Airport and the new Dubai World Central Airport,  reported that DXB’s September handle was up 9.1% y-o-y to 177,000 tonnes, and up 3.7% for the first nine months of 2012. Given that most of the world’s major cargo airports would be happy to report even a small decline, this is fairly impressive. However, when we add in our estimate of the freight handled at DWC, it becomes even more impressive – with the combined handle up about 15% in September and up 10% for the first nine months. We have updated the chart to include the Dubai data.

In its summary of the global air freight scene at the end of August, the International Air Transport Association was fairly pessimistic. Demand was down compared to August 2011, and IATA’s outlook for the near term was relatively bleak: “Declines in business confidence signal potential further weakness in the months to come.”

With September air freight data now available from most of the world’s major carriers and airports (see chart, at right), IATA’s pessimism seems, if not spot on, at least not too far off the mark. The big three Chinese carriers are seeing significant demand growth, as are carriers from the Gulf region, but in the rest of the world demand continues to decline, despite easier comps. And regarding the situation in the Gulf, it is worth noting that Emirates (the region’s bellwether carrier) says that the rising demand has been accompanied by falling yields, so things are not as rosy as they may seem, even there. 

Perhaps the best way to summarize the current situation is that while things may not be quite as bad as many feared, it is obvious that the good times have not returned. “Less bad” is probably the best descriptor. (Except, of course, for Turkish Airlines, which is clearly operating in a separate reality where harsh economic times generate a massive demand for air freight.)

To flesh out the snapshot captured by the chart, we present the individual results by region in greater detail, as follows:

Asia-Pacific

Cathay Pacific Airways reported September cargo traffic down 3.3% y-o-y in September to 748 million RTKs. Interestingly, while cargo traffic (measured in revenue tonne kilometers flown) decreased, cargo volume (measured in tonnes) increased – up 2.4% over September 2011 to 135,000 tonnes. Whichever way you view the result, it is certainly an improvement over the steep year-over-year declines reported in recent months. In discussing the September results, Cathay’s General Manager Cargo Sales and Marketing James Woodrow said: “Demand out of key markets began to pick up from mid-September onwards, helped by shipments of hi-tech consumer products out of mainland China and other manufacturing centers such as Vietnam.” He added that while the carrier would operate more scheduled services to Europe and the Americas from mid-October onwards, it would still fall short of the number of freighters operated in the same period last year. Regarding the general state of the air freight market, he said: “The market from Asia to Europe in particular remains weak and ultra price-competitive as supply continues to exceed demand despite the capacity cuts.” For the first nine months of 2012, Cathay’s cargo traffic was down 9.8% to 6.49 billion RTKs, while cargo volume was down 8.3% to 1.14 million tonnes.

Singapore Airlines reported September cargo traffic down 4.2% y-o-y to 575 million RTKs. This is almost exactly the same result as SIA reported in August (down 4.3% to 574 million RTKs), and more or less in line with the previous months of this year. Like Cathay, SIA is cutting cargo capacity, but unlike Cathay, where passenger traffic is down and cargo traffic is up, SIA saw September passenger traffic jump 7.7% y-o-y, which means that capacity reduction pretty much has to come from the freighter fleet. For the year through August, SIA’s cargo traffic was down 4.1% to 5.35 billion RTKs.

Air China reported September cargo traffic up 10.8 % y-o-y to 422 million RTKs, continuing its recent trend of solid year-over-year increases. The growth was driven by solid gains across the board, with international traffic up 9.0% to 313 million RTKs, while the smaller domestic traffic rose 15.5% to 100 million RTKs. Regional traffic (i.e. to Hong Kong and Macau) was up 26.6%, but is so small (just 9  million RTKs) that it does not have a significant impact on the total. After declines in the early part of the year, the strong gains in recent months have pulled Air China’s traffic for the first nine months of 2012 almost back level with 2011 – down just 0.6% to 3.28 billion RTKs.

Shanghai-based China Eastern Airlines (majority partner in the China Cargo Airlines jv) reported September  cargo traffic up 4.0% y-o-y to 435 million RTKs. International traffic was up 3.9% to 330 million RTKs, and domestic traffic was up 6.9% to 94 million RTKs. While China Eastern’s cargo traffic fell in July and August, strong gains in the first half of 2012, and now in September have pushed the year-to-date traffic up 10.2% to 3.51 billion RTKs, with a 15.0% increase in international traffic to 2.75 billion RTKs, more than enough to overcome a 0.9% decline in domestic traffic to 674 million RTKs.

Guangzhou-based China Southern Airlines reported September cargo traffic up 12.1% y-o-y to 379 million RTKs, led by a 13.5% increase in international traffic to 234 million RTKs, while domestic traffic was up 9.5% to 144 million RTKs. For the first nine months of 2012, China Southern’s cargo traffic was up 14.3% to 3.02 billion RTKs.

Hong Kong Air Cargo Terminals (Hactl, which handles over 70% of the cargo at Hong Kong International) reported its September handle up 6.3% y-o-y to 238,000 tonnes. Export volume was up 2.2% (its first y-o-y gain in many months), while import and transhipment volumes were up 8.7% and 13.7%, respectively. This September result, coming off a tougher comparison month, is encouraging, but we point out that it was also driven by some one-off events (IT product launches) and may or may not indicate a real trend of improvement, For the first nine months of 2012, Hactl’s handle was up 0.6% to 2.01 million tonnes.

Shanghai Pudong international Airport Cargo Terminal Company (Pactl, the biggest cargo handler at Shanghai’s Pudong Airport) reported its September handle up 1.7% y-o-y to 108.000 tonnes. This is slightly down from the 2.8% gain reported last month (which was the first real gain in 2012), but at least still in positive territory. International volume was up 2.1% to 101,000 tonnes, while Pactl’s relatively small domestic handle declined 3.9% to 8.000 tonnes. (Shanghai’s other airport, Hongqiao, handles much of the city’s domestic traffic). For the first nine months of 2012, Pactl’s handle was down 4.3% to 917,000 tonnes.

Europe & the Middle East

Lufthansa Cargo (LHC) reported its September traffic down 5.9% y-o-y to 734 million RTKs. As was the case last month, this total is a bit misleading, as it does not include cargo carried by Lufthansa’s two big subsidiary carriers, SWISS and Austrian Airlines, which both report increases in cargo traffic. If cargo carried by all the members of the Lufthansa Group is included than September’s total was down 3.9% y-o-y to 856 million RTKs. The Europe/Asia-Pacific trade lane was the hardest hit, with Group traffic down 6.2% to 373 million RTKs, while traffic on the trans-Atlantic lane was down 2.2% to 367 million RTKs. Lufthansa Cargo has responded to the continuing decline in air freight demand by cutting capacity by 7.7% y-o-y in September, leading to a 1.2 percentage point increase in load factor to 68.8%. For the first nine months of 2012, LHC’s cargo traffic was down 8.3% to 6.53 billion RTK’s, while traffic for the full Lufthansa Group was down 6.4% to 7.62 billion RTKs.

Frankfurt Airport reported its September freight handle down 2.1% y-o-y to 172,000 tonnes. While not particularly good, this is at least an improvement over the declines in the previous eight months. For the year through September, FRA’s cargo handle was down 8.4% to 1.50 million tonnes.

Air France-KLM (including all-cargo subsidiary Martinair) reported September cargo traffic down 6.6% y-o-y to 869 million RTKs. Traffic was down on both of AF-KLM’s two major trade lanes – down 4.7% to 359 million RTKs to/from the Americas, and down 10.1% to 340 million RTKs to/from the Asia-Pacific region. For the year through August, AF-KLM’s cargo traffic was down 6.5% to 7.89 billion RTKs.

International Airlines Group (IAG, parent of British Airways and Iberia) was the only one of Europe’s big three to report any good news on the cargo front, with September traffic up 21.2% y-o-y to 503 million RTKs. The split between the two subsidiary carriers’ cargo performance was dramatic, with BA reporting August cargo traffic up 6.0% to 409 million RTKs, while Iberia’s trend of poor cargo results worsened, with a 15.3% decline in September to just 94 million RTKs. For the year through July, IAG’s cargo traffic was down 0.9% to 4.56 billion RTKs, with a 2.5% gain at BA to 3.57 billion RTKs not enough to overcome a 12.8% drop at Iberia to 990 million RTKs.

London’s Heathrow Airport reported its September cargo handle up 1.7% y-o-y to 121,000 tonnes. For the first nine months of 2012, LHR’s handle was down 1.3% to 1.10 million tonnes. Nearby Stansted reported its September handle up 5.2% to 18,000 tonnes, and it’s year to date handle up 3.5% to 159,000 tonnes.

Turkish Airlines continues to report increases in cargo demand that make it appear to be operating in an alternate universe. Turkish reported September cargo volume up 31.9% y-o-y to 39,825 tonnes. For the year through August, Turkish’s cargo volume was up 26.7% to 340,856 tonnes.

Americas

Chile-based LATAM, the entity created from the merger of LAN and TAM does not provide operational statistics for the combined carriers, but reported that September cargo traffic for LAN declined 2.7% y-o-y to 290 million RTKs, as imports into Latin America continued to be down compared to 2011. For the year through September, LAN’s cargo traffic was down 1.2% to 2.60 billion RTKs.

United Airlines (including Continental Airlines) reported September cargo traffic down 0.3% y-o-y to 294 million RTKs. For the year through September, United’s cargo traffic was down 6.4% to 2.71 billion RTKs

Delta Air Lines continued to report growth in cargo demand, with September traffic up 3.2% y-o-y to 294 million RTKs. For the year through July Delta’s cargo traffic was up 1.1% to 2.62 billion RTKs

American Airlines reported September cargo traffic down 8.3% y-o-y to 199 million RTKs. For the first nine months of 2012, American’s cargo traffic was down 1.2% to 1.94 billion RTKs.