Of all the signs that the global economy is recovering after a prolonged post-crisis slump – rising employment, rising business confidence and even inflation – one sure indicator of better times can be found in air freight. Indeed, 2017 was an exceptional year for air freight demand, with industry-wide freight tonne kilometres (FTKs) rising year on year by 9%, the strongest year of growth since 2010. According to IATA, this surge was helped in part by a pick-up in global trade and economic activity; the association notes that the global goods trade also posted its strongest year of growth in six years.
But, says IATA, 2017 was particularly notable in that air freight growth outperformed global trade by the widest margin since 2010. Indeed, it notes, “this outperformance is typical of the pattern that we tend to see during upturns in the economic cycle, when manufacturers and retailers turn to the speed offered by air freight to restock their shelves". IATA was in this particular case referring to the Valentine’s Day trade, which sees tonnes of cut flowers shipped around the world.
Demand for perishable goods linked to a specific holiday would, naturally, mark an upturn in air freight expectations. But IATA is looking beyond just flowers and 14 February, estimating that the latest restocking cycle can explain about half of air freight’s outperformance relative to global goods trade seen in 2017. Other key factors driving air freight demand growth could be “the positive impact [of] growing sectors such as e-commerce and pharmaceuticals”.
To assess the outlook for air freight demand over the coming years, IATA says a good question to ask, then, is whether air freight will “decouple from wider growth in global goods trade”.
What the future holds remains to be seen, but there is no question that 2017 was a good year for carriers. That 9% FTK growth in 2017 stands in comparison with just 3.6% year-on-year growth in 2016. And capacity, measured in available FTKs, increased 3% year on year in 2017, so the profitability of air freight carriers is likely to be impressive.
As Flight Ascend Consultancy's head of market analysis, Chris Seymour, puts it: “The message is that this was really a recovery year, with good traffic levels in the three main markets of Asia, Europe and North America. Perhaps even more key was the capacity discipline – just 3% up compared with 9% traffic, although there were signs late in the year that more capacity was going in – something for the industry to be careful about.”
An A330-300P2F for DHL Express. Passenger-to-freighter conversions were up 7% for the year
Airbus
Remarking on that capacity growth, he adds that medium-sized aircraft led the way; there was a 4% increase in the widebody freighter fleet in 2017. Within that, the standout was the Boeing 767, which grew by 33 aircraft (15%).
Of bigger aircraft, says Seymour, the in-service Boeing 747 freighter fleet grew by just four units. “It is still the key high-capacity mover but the fleet is virtually static,” he says.
Speaking in December, IATA director-general Alexandre de Juniac said: "We had a very difficult environment [for air cargo] but we have recovered [in 2017] with very good figures; capacity increased by less than 4% and demand by 9%. So for once the cargo business will be profitable in many airlines, which has not been the case."
IATA’s figures reveal wide geographic discrepancies. Carriers in Africa saw the greatest gains in air freight demand, at 25%; IATA attributes this growth to demand for shipments between the continent and Asia.
In Europe, rising exports helped airlines lift freight business by 11.8%. Demand jumped 8.1% in the Middle East, 7.9% in North America, 7.8% in the Asia-Pacific region and 5.7% in Latin America, where, IATA says, the key driver was an improving Brazilian economy.
Further evidence that the 2017 upturn is cause for sustained optimism can perhaps be seen in the demand for passenger-to-freighter conversions, which rose last year by six units (7%) to 91 aircraft. Widebody conversions jumped to their highest level in five years, rising more than 50% to 28 aircraft during the year. Of these, 24 were 767-300s, with demand driven by Amazon's Prime Air unit, which received 16 converted 767s – five -300ER BCFs, and 11 300ER BDSFs.
In addition, Aloha Air Cargo, Amerijet International, Air Transport International, Atlas Air, Cargojet and SF Airlines each received a single converted 767-300ER. Kalitta Air received two.
The year also saw an Airbus A300-600 converted for Uni-top Airlines and the delivery of the first A330-300P2F to ASL Airlines.
A pair of Asiana Airlines 747-400 Combis were also converted to full freighters.
Narrowbody conversions fell by three units to 54 aircraft. Here, the 737 family accounted for 32 conversions. This comprised five 737-300s, 24 737-400s, two 737-700s, and one 737-800. With feedstock for older 737 "Classics" starting to run down, conversions of 737NGs are likely to grow in the coming years.
"Conversions of 737s held up in 2017, as this is a good freighter and there is reasonable availability," says Seymour. "The main narrowbody change was that FedEx completed its 757 conversions, bringing down the 757 total."
Conversions of 757s fell to 16 from 27 in 2016, while other narrowbody conversions included a five MD-80s and a single Bombardier CRJ200.
Key recipients of modified narrowbody freighters in 2017 were ASL Airlines (six 737-400SFs), West Atlantic (four 737-400SFs), DHL Air (six 757-200SFs), SF Airlines (four 757-200SFs) and Aeronaves TSM (four MD-82SFs).
"This year will be good for 737 Classics and 757s, although since feedstock is running out it may be the last good year," says Seymour. "Nonetheless, 737NGs will get more traction in 2018. While there will be more NGs and with the first A321s becoming available, the main issues here will be pricing and availability. Initial customers will mainly be lessors and Chinese operators."
In the turboprop segment, there were nine conversions redelivered, down from 10 the previous year. These comprised four ATR 72-200s, two Dash-8 100s, one Q200, and two Saab 340Bs.
As for conversion locations, the USA led with 34, followed by Israel with 21 and China with 16. While US and Chinese conversions are dispersed geographically, Israeli conversions all take place at Tel Aviv's Ben Gurion International airport, home of conversion specialist Bedek Aviation.
Additional reporting by Greg Waldron in Singapore
Source: FlightGlobal.com
