The August to November peak season as retailers stock up for Christmas used to be the time of year when air cargo made its big bucks - a reliable bonanza to wipe out any weak figures from earlier in the year.
However, once again air cargo managers find themselves looking ahead with considerable caution. IATA has reported year-on-year falls in cargo traffic for May, June and July, while the ratcheting up of the sovereign debt crisis in August upset global stock markets and consumer confidence, making the prospects for this year's peak look distinctly uneasy.
Even arch-optimist of the air-freight business Ram Menen, divisional senior vice-president cargo for Emirates, strikes a sombre note: "The market challenges seem to be never-ending these days. Forecasting has become extremely challenging," he says.
BOUNCEBACK
In theory, he reckons low inventory-to-sales ratios in markets such as the USA should point to an upsurge in inventory replenishment in the coming months. However, bearing in mind two other recent peak seasons which disappointed - 2008 and 2010 - he is not banking on it. In retrospect, the peak month for air cargo was May 2010, when the post-2009 recession bounceback reached its height.
IATA says air cargo traffic has declined 6% since then, but favourable year-on-year comparisons have hidden that fact in air cargo statistics. Globally, these did not move into negative territory until May this year, with IATA's figures showing a 4% fall, followed by 3% in June. There were warning signs as far back as February, however, when Asian carriers reported a 4.5% fall compared with the same month in 2010. That was put down to the effect of the Chinese New Year, where the date varies from year to year, but in fact the figures have failed to turn positive since.
In April, there was a 2.6% fall for Asian operators, followed by 9.8% in May - perhaps distorted by the aftermath of the Japanese earthquake in March. June figures fell 6.1%. By this time the decline was general, with European and North American carriers all seeing year-on-year falls from May onwards, and Middle Eastern airlines seeing much-reduced growth. July figures showed some improvement, in that the overall fall was only 0.4%, with European carriers down 0.5% and the North American ones up 2%. Since cargo traffic was falling by this time in 2010, this could be the effect of more favourable year-on-year comparisons. However, there is also some anecdotal evidence of a levelling off.
Mattijs ten Brink, senior vice-president sales and distribution for Air France-KLM Cargo, says July was slightly better than May and June, and "indications for August and September are the same - that is that, the market is stabilising". July also saw a slight uptick in Chinese exports. In general, however, a weakness in Asian exports remains the biggest worry. Asian carriers suffered a 3.9% year-on-year traffic decline in July, and all carriers report continued weakness out of China. Nick Rhodes, director of cargo for Cathay Pacific, reports "definite softness" and wonders if there will be any peak season at all this year.
The Chinese picture may be distorted by overcapacity, however. Ten Brink says capacity was up 60% year on year in Hong Kong in the first quarter, and there are widespread reports that this market has got a lot more competitive. Nor is the problem confined to China. IATA figures show all segments, apart from Latin American carriers, increasing capacity significantly more than traffic throughout 2011.
The situation could be about to get worse too, with Boeing finally starting deliveries of its 747-8 Freighters and continued growth in the passenger business boosting belly cargo capacity. Not all markets are depressed, of course. Cathay cites western China, India, Latin America and Australia as brighter spots. Menen agrees on India, saying it is benefiting from frosty relations between China and the USA. He adds that Middle Eastern and African countries have also shown resilience, and he expects air cargo to benefit from reconstruction work in Tunisia, Egypt and Libya.
Both carriers, along with Air France-KLM, also report continued resilience in exports from Europe to Asia - an encouraging rebalancing on what has always been the weaker sector for freighter operators. Ten Brink adds Asia to Africa and Asia to Latin America as markets where Air France-KLM can offer creative solutions. Such creativity is probably just what the air cargo business is going to need as the global economy struggles to find direction in the coming months.
The euphoria of the bounceback in 2010 raised hopes air cargo might return to the days of easy growth it used to take for granted. For now, that hope seems misplaced.
Source: Airline Business
