Air Cargo

Global Air Cargo Volumes Recover to Pre-COVID levels inside 10 Months

The global air cargo market has virtually recovered from the losses that the COVID-19 pandemic caused according to performance data for February 2021 from industry analysts CLIVE Data services and TAC index.

Chargeable weight for the last 4 weeks of the month, stood at 1% compared to February 2019 and 2% ahead of last year’s number. Niall van de Wouw, Managing Director of CLIVE data services commented the following that passenger airlines will be, “dreaming of such a recovery in passenger demand.”

CLIVE data will continue to compare first to market data to pre-pandemic numbers of 2019, to give a meaningful perspective of the industry’s performance. This is planned to occur until at least Q3 of this year. This will be produced alongside the 2020 comparison.

Capacity levels in February 2021 were -8% and -5% of 2019 and 2020 respectively. CLIVE’s load factor calculated both the volume and weight perspectives of cargo flown and capacity available was up 5% pts on February 2019 and 9% pts on February 2020. The overall dynamic load factor was the same as last months while the monthly volumes climbed 7% despite the short month of February as capacity rose 5% over January.

Van de Wouw added: “These are tricky months to compare due to the Chinese New Year and Leap Year variances, so we have to be careful in how we read the market. To give a meaningful view, it makes sense to keep an eye out to 2019 before the pandemic took hold and, on that basis, air cargo demand is now nearly at par with pre-COVID volumes despite much less capacity in the market. If we normalise for last year’s Leap Year, we can see a 2% growth in global volumes compared to February 2020 but that does not tell the tale by any measure – the apparently modest global growth number is masking what lies underneath. Volumes from China to Europe, for example, were nearly 5 times higher in the four weeks of February 2021 than in the similar weeks of 2020. This was caused by the dramatic drop in volumes because of the of the factory closures a year ago in response to the COVID outbreak. Volumes from Europe were down by -11% for the same period.”

“Demand is increasing and there are a lot of passenger planes sitting around that could start flying cargo, but I don’t think that will happen proactively. Given the high financial risks, when it comes to adding capacity, airlines are more likely to follow the market as opposed to trying to stimulate it. But if it makes sense, they will surely fly those aircraft. Air cargo has been resilient and, bit-by-bit, has clawed back the losses we saw only a few months ago. In April 2020, volumes were down -39% but are now back to the pre-COVID level. Who would have that possible inside 10 months? It’s a recovery airline passenger departments will be dreaming of.”

According to TAC index, volume, capacity and load factors continue to reflect the high price of transporting shipments via air cargo at the moment.

Robert Frei, Business Development Director at the company commented: “Volatility remains high (also intra month) and, given the much higher pricing levels than a year ago, is having a major impact. Looking at PVG-EUR, for example, if you are 10% off with your procurement today (which would be RMB 3.20) compared to 2020 levels, it would have meant a deviation of 18%. This presents a very risky environment for freight forwarders and potentially an immediate loss of their gross margins of 8-10%. So up-to-date pricing information on a weekly basis is an absolute necessity to manage these volatile periods. We also assume the spread of spot rates is likely to remain high.”

The latest data from TAC Index shows that despite the ‘mundane’ monthly pricing average there is still quite a lot of volatility in the weekly rate levels.

Data shows that the Baltic Exchange Index was +2% over January which also took Chinese New Year into account which is normally considered peak season but looking more closely at the impact on the PVG – EUR compared to previous years, TAX index observed the following:

• 2019 – overall period +8%
• 2020 – overall period -4%
• 2021 – overall period -13%

February 2021 saw the highest drop in yield compared to that of the previous years during the period around Chinese New Year. In absolute terms this compares as shown below:

• 2019 – average RMB 20 /kg
• 2020 – average RMB 17.5 /kg = – 11% to previous year
• 2021 – average RMB 31 /kg = +79% to previous year or +63% higher than 2019

TAC Index added that interesting observations have made when comparing other international routes such as HKG – EUR which stayed relatively flat in terms of pricing levels whereas the PVG counterpart increased by +7%. Meanwhile, HKG – USA went up 2%, whilst PVG – EUR went down by -1%.

air freight

The Impact of COVID-19 on the Air Freight Industry

Due to the COVID-19 pandemic, air freight has been one of the hardest hit industries in logistics.

Lockdown restrictions and travel bans have caused chaos internationally with many flights being grounded. On a normal day, air freight is responsible for the transit of trillions of dollars’ worth of shipments every year. Flying is one of the fastest methods of transport and is considered ideal for low volume, high-value items. With the industry currently at its knees, it has heavily disrupted global supply chains and production cycles for multiple countries. Other sectors of aviation including commercial and private air travel have also taken major setbacks with many airlines having to resort to mass redundancies of their employees.

 

The Pre-Pandemic Air Freight Industry

Before COVID-19, much of the worlds air cargo was carried via passenger aircraft. This was transported in the aircraft hold and made up 40% of annual global cargo. New generation, wide bodied aircraft are equipped with a generous belly hold capacity and are ideal to carry large quantities of cargo. A Boeing 777 passenger aircraft is able to carry as much as 20 tonnes and was frequently used to transport many shipments. Unfortunately, with only 20% of the world’s air traffic in operation at the moment, this has been significantly impacted.

Although freighter aircraft continue to operate by cargo operators and freight forwarders, many of these aircraft are hub focused and are not able to access the same extensive route network as commercial aircraft which is proving restrictive and taking away much of the convenience air freight has always promised.

 

Making Up the Shortfall

To ensure essential cargo continues to be transported, airlines have been utilising their main passenger cabins. The load sheet must be worked out precisely to ensure the weight and balance of the aircraft is not affected and is secured into passenger chairs with netting. It was widely publicised that emergency PPE for frontline healthcare workers was transported from China in this way.

At least 20 airlines have offered their aircraft for global cargo missions including British Airways, Delta and Cathay Pacific. The aircraft are chartered by freight forwarders and operated by the airline’s crew.

 

Low Fuel Prices Making up for Low Occupancy

Low fuel prices have eased the expense of low occupancy flights. This has been a saving grace to many airlines which has enabled them to continue flying to destinations they would otherwise have had to cancel. Aircraft manufacturers, Boeing and Airbus have also offered their freighter aircraft to transport critical supplies including 1.5 million facemasks.

Despite these creative solutions and work arounds, the industry is experiencing a major shortfall in the capacity it is able to transport and is majorly disrupting the transportation of essential goods such as medical supplies to virus epicentres.

Coordinating cargo supplies to demand is a time-consuming business that requires intense labour and negotiation from a lot of people. During the pandemic, this has been covered by governmental departments and national carriers and have usually been organised on an ad-hoc basis

 

Operational Obstacles

Before a shipment reaches its final destination, operators have to address certain challenges including airport curfews, border restrictions and flight time limitations. If the aircraft is permitted to land in a certain country, the crew can be subject to gruelling quarantine and testing regulations. This could see them spending up to two weeks in a hotel room upon arrival causing severe disruption to the operator. Without their crew they are without an aircraft prohibiting them from making other vital cargo journeys.

These issues are likely to cause pandemonium for the future of passenger air travel when lockdown restrictions lift. It is likely that these issues will still be in affect and will continue to prohibit many people getting to where they need to go.

 

Preventative Measures for the Industry

Aviation is an industry that relies on governments to work collectively and cohesively. When it comes to air freight, there needs to be more of a concerted effort made to remain consistent from one country to the other. The COVID-19 pandemic has taught us that new procedures are required to prepare ourselves for future crises. A framework must be developed for all countries to work from and ensure that the transportation of vital supplies is not severely disrupted regardless of the critical threat level of the world.

The development of this framework will involve analysis, risk assessments, training sessions and the re-writing of standard operating procedure.  For aviation in particular, more consideration needs to be given to air cargo and how we can keep operations going in the face of a crisis.  The air cargo industry has proved invaluable during the COVID-19 pandemic; however, more support needs to be given to be able to provide that invaluable service in the future.

post-brexit-red-tape-for3e-trade

Post-Brexit Red Tape for EU Trade

Despite the lack of lorries at borders since the UK left the EU Single Market and Customs Union, various sources have highlighted significant disruption to goods being transported citing post-Brexit red tape as the cause. This is having a significant impact on the trading of goods with plant or animal origins.

The Scottish fishing industry have been struggling with confusion and uncertainty following the implementation of the deal agreed on Christmas Eve between the UK and EU governments. Some firms have seen major delays with some of their shipments being halted until 18th January due to issues with health checks, computer systems and customs paperwork which is leading to a big backlog as reported by the Guardian. As a result of this, many seafood shipments heading to France and Spain have been rejected because of the delay.

Due to backlog, the DFDS, the UK seafood industry’s largest logistics provider has suspended its groupage export service which allows exporters to group their shipments together in one consignment. This was decided only a week after the new trade deal was implemented. DFDS are expecting to resume deliveries next Monday but are warning that the service would be expected to take a lot longer than what it would before Brexit and is highlighting the importance of correct and accurate paperwork.

Other companies such as Danish ro-ro shipping and logistics operator have said that they endeavour to fix IT issues and provide more training to their staff to help customers complete the required customs paperwork and achieve a smoother process.

DB Schenker Faces Challenges

DB Schenker has highlighted the significant challenges it has faced relating to the introduction of the new customs formalities that now apply to shipments as a result of Brexit. Following the suit of many other providers, they have also placed a hold on all shipments being sent to the UK.

The provider has found that only 10% of customs documents submitted with shipments have been complete and free of errors. To try and manage this situation effectively the company have redeployed staff from their Brexit Task Force that was established over a year ago.

In a statement, they said: “DB Schenker expects shipping volumes to increase further in January. Logistics service providers can only process consignments quickly if the share of correct and complete customs documents also increases significantly. Both shipper and consignees need to ensure that compliant documents are provided.”

Cross border e-commerce trade expert, Hurricane Commerce warned that the struggles faced by UK businesses in the first few weeks of the new regulations being implemented are the “tip of the iceberg” and that severe challenges should be anticipated.

This comes as parcel carrier, DPD, was also forced to pause its road service from the UK to Ireland and Europe until the end of last week due to customs clearance issues with post-Brexit parcels.

Customs Clearance Staff Shortages

Another challenge that firms have desperately tried to mitigate before 31st December was the sourcing of a sufficient number of customs clerks to be trained up and ready before the implementation of the new trading regime. Speaking last Autumn, Barney Weston, managing director of Oceanic Resources International warned that serious shortage was unavoidable.

On the current situation, he said: “I think most (firms) managed to get the bulk of their teams in place before the end of the year, but training and ‘filling the gaps’ continues. In most cases a Customs and Compliance Manager/ Brexit Head is in place (in firms) giving the strategic lead on how to handle the UK’s new trading relationship.”

He went on to say: “I know that in many cases training and upskilling is on-going, and there is still high demand for people to fill customs clerk positions, but it’s hard to accurately quantify this in numbers. Certainly, anyone who has ever sniffed a customs clearance in their career history is still worth their weight in gold!”

“I think the whole industry will have a clearer picture on the situation by the end of the month; so much was unknown heading into Brexit. I think that shortly people will know if they can handle demand with the current staff levels or if more will be needed.”

“One positive; I spoke with a top 5 UK supermarket earlier this week who we have been assisting in building their customs teams, and so far, everything is working.”

 

British International Freight Association have confirmed that its freight forwarder members appear to be managing the challenges with a spokesperson for the association saying, “(Members) are learning the new systems as they go – (there were) hard lessons learnt but they are getting to grips with the situation in exceptionally difficult circumstances. BIFA has always said that the preparing and lodging of customs declarations was the relatively easy part of the new procedures, and the bigger issues would be with non-tariff matters such as safety and security entries and SPS controls. That has already been seen.”

BIFA director general, Robert Keen commented, “We receive calls asking technical questions on procedures but so far as we can gauge the members are very busy but coping.”

Another source close to BIFA said, “(Evidence) suggests that cross border trade last week was very quiet; probably because of pre 1st January stockpiling and companies waiting to see how things pan out. The people I have spoken to expect increased volumes this week, but nowhere near normal. So, we probably won’t get to see the true picture for some time. And who knows what the new normal will be?”

 

Heathrow Cargo

Why is Air Cargo seeing an increase since COVID-19?

According to CLIVE data services, air cargo volume saw a 12% increase in the last week of June compared to the last week of May. Niall van de Wouw, managing director of CLIVE, explains this increase was initially due to the urgent requirement of personal protective equipment (PPE) needed by governments in an attempt to contain COVID-19. Despite the international demand for PPE now beginning to diminish, Van de Wouw is confident that air cargo volume will continue to rise month on month.

“Our June analyses seems to suggest the first steps towards a structural market recovery. Despite the decreasing demand for PPE in June, we still see that the volumes increased over May. We are starting to see a more recognisable airfreight market following more logical economic principles and more logical rates.”

There is no denying that aviation has been one of the industries hit hardest by the COVID-19 pandemic. Government restrictions have prohibited entry for travellers causing ticket sales to plummet, reduced schedules and redundancies for airline staff. An increase in air cargo volume is a glimmer of hope in what has been a dark time.

How has COVID-19 impacted Air Cargo Volumes?

A number of sources have submitted their findings on how the global pandemic has affected air freight including; Veritas Global, Seabury and The International Air Cargo Association (TIACA). Alongside this, the International Civil Aviation Organisation (ICAO) have also done their own studies, which are updated and shared on a weekly basis. Despite the sheer number of agencies looking into this there continues to be a lack of reliable data but what does stand out is the following:

• Global air cargo capacity is down 35% from 2019
• 20% of belly cargo continues to fly
• Freighters capacity is showing signs of stabilising

Due to the current restrictions of passenger travel, airports are seeing a sharp decrease in their revenue forcing many to close. Despite full closures to passenger traffic, a share of airport and airside infrastructure must remain open to support air cargo which comes at a cost to a weakening cash supply.

How is TIACA Supporting the Industry?

TIACA believes that it is their permanent role to promote the air cargo industry. During the outbreak of the coronavirus, they have focused their efforts in reminding governments how important the role of the air cargo industry is to the global economy, international trade and in battling the devastating effects of COVID-19. The value of air cargo has been highlighted during the pandemic as without it the transportation of valuable medical, PPE and food supplies would not have been possible. As COVID-19 looks set to continue its impact on the world, so will the demand for medical supplies. It is vital that delivery services are able to keep up with this demand.

How have Cargo Operations Changed Due to Coronavirus?

Changes to cargo operations to mitigate the impact of coronavirus include:

• The use of passenger aircraft
• Expanded use of charter flights
• Changes in flexibility to certain regulations
• Introduction of new standard operating procedures
• Increased protection for staff

The implementation of these new operations and assessment of how effective they are is a time-consuming process and is changing everyday as we learn more about the novel virus. TIACA and other aviation organisations are pushing an initiative where a working document is created for a post COVID-19 recovery path. The main focus of this document is to suggest short, mid and long-term solutions to the issues caused by the pandemic so that the industry as a whole can recover.

What can the Industry do to Prevent this Impact from another Pandemic?

When industries such as aviation rely on governments from all over the world to collaborate and work cohesively, there needs to be a concerted effort to make things consistent. A standard that extends from one end of the world to the other.

It is clear that the implementation of new procedures to prepare ourselves for a future crisis are required; particularly, relating to health and safety in the workplace. Emergency plans will need to be drawn up and implemented to ensure that if another pandemic were to occur that industries would have systems in place to mitigate the effects that were able to destroy everything so quickly and in such a short space of time. This will involve analysis, risk assessments, training sessions and re-writing standard operating procedure. For aviation in particular, more consideration needs to be given to air cargo and how we can keep operations going in the face of a crisis. The air cargo industry has proved invaluable during the COVID-19 pandemic; however, more support needs to be given to be able to provide that invaluable service in the future.

sea freight china

A Guide to Sea Freight Shipping from China

Sea freight is the largest method of shipping for international import and export business. Competitive prices and multiple options make sea freight the first choice for global trade. When it comes to shipping from China, businesses need experienced freight forwarders like our team at Supreme Freight who are familiar with transporting for companies of differing sizes as well as to a wealth of countries. As a China freight agent, we hope that you are able to gain something from the knowledge and experience shared in this article.

Trade Terms

Get accustomed to all the codes and terminology with our simple breakdown:

Incoterms – A term given to one of the common terms of trade. When applied to buying goods from China, there are four incoterms. Each of the incoterms are assigned a code relating to how far the suppliers transport the shipment to. The codes of these incoterms are as follows:

EXW – Transport as far as the factory/manufacturer

FOB – Transport as far as a nearby port in China

CIF – Transport to a nearby port in your country

DAP/DDU – Transfer to your place of business

The codes can be split into two further categories:

  • EXW/FOB Category – The buyer can utilise your own freight agent and liaise with them directly regarding payment.
  • The Other Category – The buyer uses their own freight company and your company subsidises that.

When looking for a freight forwarder, it is important that you understand these terms and codes to enable them to know your requirements when shipping your goods to China.

Container Types

It is important to know the following commonly used container types:

  • 20’GP – Allows for 20ft of storage. 20’GP is designed to carry more weight than voluminous cargo. E.g. Minerals, metal and machinery
  • 40’GP – Allows for 40ft of storage. 40’GP is designed to carry more voluminous cargo than heavy cargo. E.g. Furniture, tyres, and toys
  • 40’HC – Allows for 40ft of storage for shipments of a great height.

Although the volume of the 40’ containers are double the volume of the 20’, they are still bound to the same weight restriction that China applies to its exports which is no more than 27-28 tons. The ocean rates for a 40’ container shipped from China are less than two 20’ containers and it is no extra cost from a 40’ container for a 40’HC.

Freight forwarders are also knowledgeable of these commonly used container types. Knowing this information upfront will allow the freight forwarder to help and advise you with the right service.

Shipment Type

Shipment types come in the following two categories:

  • Full Container Load (FCL) – In which a company fills a whole container with their own goods. Containers can be from 20 – 45 feet long.
  • Less than Container Load (LCL) – Where different companies share the same container and load their shipments into it. This would then get split once it reaches port.

In order to ascertain what shipment type is best for your business you need to consider the packaging that your shipment requires whilst being transported, if you select an LCL, would it be better for your shipment to use a courier or decide whether it is possible to use an FCL.

Major Ports

Each port has a different charge for FCL and LCL containers. The breakdown of the Chinese ports are as follows:

  • Shanghai – This major city enjoys the most economically developed of everything. From where it is located, it serves interior provinces via river ports along the waterway that extends from it.
  • Shenzen – This port is accessible to Hong Kong and the Pearl River Delta making it another key port for the South of China.
  • Ningbo-Zhousan – This port serves both Ningbo, which has good connections with Central and Western China and Zhejiang, a wealthy region with a manufacturing industry.
  • Hong Kong – Fastly expanding into the ‘international shipping service hub of the Far East,’ Hong Kong provides 340 container liner services per week, connecting to around 470 destinations worldwide.
  • Guangzhou – Historically, a key centre of trade in China, the port is striving to be the international shipment hub for the Maritime Silk Road component. It is a port that provides options for importers, exporters, third party logistic companies and ocean carriers with its reduced port and berthing fees.
  • Qingdao – The most important port of Northern China. It is located next to the Bohai Bay region of which it serves.
  • Tianjin – This port is second only to Qingdao port in capacity in Northern China. The port’s container handling business are developing additional domestic and international routes.
  • Xiamen – The port is located at the mouth of the Jiulongjiang River and has over 68 shipping routes to over 50 countries including Kaohsiung in Taiwan.
  • Dalian – This port is located at the most northern ice-free port of China and is the largest port in North East China serving seaports in East Asia, North Asia, and the Pacific Rim.

Researching into the port that best serves where your shipment will be transported to, will enable your freight forwarder to connect you with our most suitable partners.

For a consultation and advice on your shipment, get in touch with us and we will do our best to help.

 

emissions

The UK should include aviation and shipping in net zero emission goal

The aviation and shipping sectors should formally be included in Britain’s target to cut its greenhouse gas emissions to net zero by 2050, the government’s climate advisers said on Tuesday.

Britain earlier this year became the first G7 country to set a net zero emission target although the shipping and aviation sectors were not explicitly included in the goal.

Combined the two sectors account for around 5% of global greenhouse emissions but if left unchecked this is expected to grow significantly, particularly as passenger flying numbers increase.

“Now is the time to bring the UK’s international aviation and shipping emissions formally within the UK’s net-zero target. These are real emissions, requiring a credible plan to manage them to net-zero by 2050,” Chris Stark, chief executive of the Committee on Climate Change (CCC), said in an email.

The CCC said, in a letter to Britain’s transport minister, Grant Shapps on Tuesday, emissions from aviation could be reduced by around a fifth by 2050 by using sustainable biofuels, improving fuel efficiency and limiting demand growth to at most 25% above current levels.

It said zero-carbon aviation is unlikely to be feasible by 2050 and that greenhouse gas removal methods would be needed to offset remaining emissions.

The CCC said the government said could establish a market for scalable greenhouse gas removal solutions, such as bioenergy carbon capture and storage, which sees emissions from lower carbon biofuels captured and stored to prevent them going into the atmosphere.

In the shipping sector zero carbon or near zero carbon could be feasible by 2050 the CCC said, if there is a widespread adoption of cleaner and as yet mostly so far untried fuels such as hydrogen or ammonia.

The CCC advice came as several ports, banks, oil and shipping companies on Monday launched an initiative which aims to have ships and marine fuels with zero carbon emissions on the high seas by 2030.

The International Civil Aviation Organization has committed to a target of halving net emissions by 2050, compared to 2005 levels and is working on a Carbon Offsetting and Reduction Scheme for (CORSIA) which requires most airlines to limit emissions or offset them by buying credits from environmental projects.

The CCC, which is independent of the government, is chaired by former British environment secretary John Gummer and includes business and academic experts.

Source: Reuters.com

air freight

Air cargo carriers develop online distribution

After years of criticism that cargo airlines were failing to develop new distribution channels – the increase in digitisation and online sales means online distribution is on the increase. 

Air France-KLM Cargo has signed up to Freightos’s air freight WebCargo platform, which claims to be the world’s largest. It allows AF-KLM customers to view live rates, assess capacity availability and secure bookings on specific flights in real-time, following a pilot conducted with the carrier and Panalpina. While the platform is proving successful they are also researching others. 

Manel Galindo, chief executive of WebCargo, said the platform was used by more than 1,400 forwarders, with market pricing from more than 300 airlines. It also can provide airlines with API capability, which some other platform do not offer. It also offers an internal platform that can be used to manage offline rates, manage quoting and more. Freightos added that “real-time e-bookings would be launched in a number of countries and gradually expanded”. 

A spokesperson for cargo.one said it was an open platform for every cargo airline globally”, with a 12-week integration period. She added: “Because cargo.one is free of charge to any size freight forwarder, we have become a significant distribution channel for our partner airlines. We also offer a variety of integration methods and have successfully integrated with multiple established infrastructures. All our integration methods, whether based on legacy infrastructures or APIs, are designed to deliver the same outstanding digital user experience. 

Meanwhile, Etihad Cargo looks as if it could be next to launch a new distribution channel, following the success of its digitisation programme. 

It said it was “successfully completing trials for another major distribution channel, using automated Freight Forwarder Messaging to instantly allow bookings to be made and confirmed. These pilots were with DHL Express and DB Schenker, completed successfully in March and are in the process of being progressively rolled out across their global operations as well as to other key forwarder customers. 

Etihad last year completed its migration to IBS iCargo’s system, and launched its own online booking portal. It claims to make more sales through this channel than any other cargo airline: 16.4% of its monthly bookings coming through the platform in March. It said it had more than 6,000 registered users making online bookings every month, and volumes sold on the channel are increasing steadily. 

The new distribution channel, using API and web services, will launch by the end of the second quarter. 

“Within such a short period of time we have gone from being a very conventional air cargo operator to being the most digitised air cargo carrier of our size globally,” said Rory Fidler, head of technology and innovation. “As we move forward, we will continue to invest in technology and seek to put ourselves at the forefront of the industry’s drive for digitalisation”. 

Source: The Loadstar

air freight

Air Freight Demand Ends Year Up 3.5%

The International Air Transport Association (IATA) released full-year 2018 data for global air freight markets showing that demand, measured in freight tonne kilometers (FTKs) grew by 3.5% compared to 2017.

This was significantly lower than the extraordinary 9.7% growth recorded in 2017. 

Freight capacity, measured in available freight tonne kilometers (AFTKs), rose by 5.4% in 2018, outpacing annual growth in demand. This exerted downward pressure on the load factor but yields proved resilient.

Air cargo’s performance in 2018 was sealed by a softening in demand in December. Year-on-year, December demand decreased by 0.5%. This was the worst performance since March 2016. Freight capacity, however, grew by 3.8%. This was the tenth month in a row that year-on-year capacity growth outstripped demand growth.

International e-commerce grew in 2018 which was a positive factor for the year. Yet, there was a softening of several key demand drivers:

  • The restocking cycle, during which businesses rapidly built up inventories to meet demand, ended in early 2018;
  • Global economic activity weakened;
  • The export order books of all major exporting nations, with the exception of the US, contracted in the second half of 2018;
  • Consumer confidence weakened compared to very high levels at the beginning of 2018.

“Air cargo demand lost momentum towards the end of 2018 in the face of weakening global trade, sagging consumer confidence and geopolitical headwinds. Still, demand grew by 3.5% compared to 2017. We are cautiously optimistic that demand will grow in the region of 3.7% in 2019. But with the persistence of trade tensions and protectionist actions by some governments there is significant downside risk. Keeping borders open to people and to trade is critical,” said Alexandre de Juniac, IATA’s Director General and CEO.

“To attract demand in new market segments, the air cargo industry must improve its value proposition. Enabling modern processes with digitalization will help build a stronger foothold in e-commerce and the transport of time- and temperature-sensitive goods such as pharmaceuticals and perishables,” said de Juniac.

DECEMBER 2018 (% YEAR-ON-YEAR) WORLD SHARE1 FTK ASTK FLF (%-PT)​2 FLF (LEVEL)​3
Total Market 100.0% -0.5% 3.8% -2.1​% 48.8%
Africa 1.7% -2.2% 4.9% ​-2.8% 38.1%
Asia Pacific 35.4% -4.5% 2.6% ​4.1% ​54.0%
Europe 23.3​% 1.9% 3.7% ​-1.0% 56.7%
Latin America 2.6% ​-0.1% 6.0% ​-1.8% ​29.1%
Middle East ​​13.3% 0.1% 4.5% ​-2.1% ​48.8%
North America 23.7% 2.9% 4.5% ​-0.6% 41.4%

Regional Performance

Airlines in all regions with the exception of Africa reported an annual increase in demand in 2018.

Asia-Pacific carriers posted the weakest growth of any region in December 2018 with a decrease in demand of 4.5% compared to the same period a year earlier. Capacity increased by 2.6%. The weaker performance in December contributed to growth in freight demand of only 1.7% in 2018 compared to 2017. Annual capacity increased 5.0%. The weaker performance of Asia-Pacific carriers in 2018 largely reflects a slowing in demand for exports from the region’s major exporters (China, Japan and Korea). Signs of a moderation in economic activity in China and an escalation of trade tensions continue to pose a downside risk to air cargo in Asia-Pacific.

North American airlines posted the fastest growth of any region for the seventh consecutive month in December 2018 with an increase in demand of 2.9% compared to the same period a year earlier. Capacity increased by 4.5%. This contributed to an annual growth in demand in 2018 of 6.8%, matching the rate of capacity increase. The strength of the US economy and consumer spending have helped support the demand for air cargo over the past year, benefiting US carriers.

European airlines posted a 1.9% year-on-year increase in freight demand in December 2018 and a capacity rise of 3.7%. The improved performance in December contributed to an annual growth in demand for air cargo of 3.2% in 2018. Capacity increased by 4.3% in the same year. Weaker manufacturing conditions for exporters, particularly in Germany, one of Europe’s key export markets, along with mixed economic indicators impacted demand in 2018.

Middle Eastern carriers’ freight volumes increased 0.1% year-on-year in December and capacity increased 4.5%. This contributed to an annual increase in demand of 3.9% in 2018 – the third fastest growth rate of all the regions. Annual capacity increased 6.2%. The region continues to be affected by geopolitical issues.

Latin American airlines experienced a decrease in year-on-year demand of 0.1% in December after three months of positive growth. Capacity increased by 6.0%. Despite a decrease in demand, it’s worth noting that the within South America market continues to perform strongly, with international demand up almost 20% year-on-year. Annual growth in freight demand among Latin America carriers in 2018 increased by 5.8% – the second fastest of all regions. Annual capacity increased 3.4% in 2018.

African carriers’ saw freight demand decrease by 2.2%, in December 2018, compared to the same month in 2017. This was significantly less than the 9.4% decrease the previous month. Capacity increased by 4.9% year-on-year. It’s worth noting that seasonally-adjusted international freight volumes, despite being 7.7% lower than their peak in mid-2017, are still 50% higher than their most recent trough in late-2015. Annual growth in freight demand among Africa carriers in 2018 decreased by 1.3% and capacity grew by 1%.

Source: IATA.org
heathrow

Christmas drone chaos shows an over reliance on southern airports and shaky infrastructure

The chaos at Gatwick last month emphasised the UK air freight sector’s over-reliance on the south-east region.

When Heathrow and Gatwick are working at full tilt – which is almost all the time – they can claim to be the most efficient airports in the world.

Between 19 and 21 December, thousands of flights were grounded and cancelled after drone sightings sparked safety concerns at Gatwick.

Although few cargo flights were affected then, the sighting at Heathrow caused major industry concern.

Last month, the government launched a 16-week consultation on its aviation strategy, outlined in the publication of Aviation 2050: The Future of UK Aviation.

Throughout the document, the government refers to supporting continued growth of the air freight sector by making best use of existing capacity at airports.

Head of cargo at Manchester Airport Group (MAG) Conan Busby, speaking to The Loadstar said “MAG has the third- and fourth-largest airports and the UK’s largest dedicated cargo aircraft operation, at East Midlands (EMA). All are perfectly positioned to continue to facilitate global trade for UK businesses and consumers.”

Mr Busby added there was “significant” transformation under way at EMA with its cargo operation, DHL having doubled its capacity while UPS is building its new UK air hub there.

“Also, beyond our boundary there is the East Midlands Gateway Rail Freight development under construction, which will further support UK logistics.”

Mr Busby said MAG was “not interested in a speculative approach to growth”, but some in the forwarding community believe this may be the best way forward.

Namely, if regional airports were serious about challenging Heathrow, they would “need to be less risk averse and use any options to attract more carriers providing cargo services”.

However, Mr Busby expected EMA to lead MAG’s cargo growth in the years to come, with both Manchester and Stansted in support. He added the group would be “pushing” to make best use of the runway capacity at both airports.

He added: “All three airports will play a key role in facilitating UK global trade especially as attention turns to understanding what trade deals might look like post-Brexit.”

Both airports are now reported to be investing in anti drone technology and have invested several million pounds in providing ourselves with the equipment and the technology that the armed forces deployed over Christmas,”

Source: The Loadstar / Independent.co.uk / Fin24.com

air freight

Happy new year as air freight marks a decade ‘in the black’

IATA claims global aviation is on course for a “decade in the black”.

However, the annual pace of growth in cargo is well below last year’s “exceptional” performance.

Despite the slowdown, the association remains relatively positive about future growth, albeit it at a slower pace.

“The expected 3.7% annual increase in cargo tonnage next year to 65.9m tonnes (up from 63.7m in 2018) would be the slowest pace since 2016,” it said.

“This reflects a weak world trade environment impacted by increasing protectionism. Cargo yields are expected to grow by 2%.”

Pointing to lower oil prices, alongside “solid, albeit slower” economic growth as drivers of profitability, it said next year would be the 10thconsecutive year of profit.

Not only that, but 2019 would also mark the fifth consecutive year in which airlines had delivered a return on investment, with IATA chief executive Alexandre de Juniac sounding “cautiously” optimistic.

“We had expected that rising costs would weaken profitability in 2019, but the sharp fall in oil prices and solid GDP growth projections have provided a buffer,” he said.

“So we are cautiously optimistic the run of solid value creation for investors will continue for at least another year; but there are downside risks as economic and political environments remain volatile.”

Regionally, North America is entering 2019 on the front foot, reporting the fastest rate of growth globally, with demand up 6.6% year on year for October.

And while all regions reported growth in October, Latin America only just got in on the positivity with a mere 0.3% upturn in demand.

“Cargo is a tough business, but we can be cautiously optimistic as we approach the end of 2018 – slow but steady growth continues despite trade tensions,” added Mr de Juniac.

“The growth of e-commerce is more than making up for sluggishness in more traditional markets, and yields are strengthening in the traditionally busy fourth quarter.

“We must be conscious of the economic headwinds, but the industry looks set to bring the year to a close on a positive note.”

Source: The Loadstar