Macroeconomic forces
While Avianca’s numbers are encouraging, Aponte and others in the industry acknowledge that many factors in the north-south trade throughout Latin America are beyond their control. Drilling deeper into the data uncovers important disparities between countries and carriers. And while FTKs alone aren’t the whole story, they are an important indicator alongside metrics such as yields and freight load factors.
Yields, for instance, are largely a product of macroeconomic conditions, such as currency valuations and devaluations, and the general state of the economy, all of which have recently driven down the value of southbound freight – the sort that carriers make money on.
Exports from South America were worth US$464.5 billion in 2015, but that figure is down 30.3 percent from 2011’s $666.8 billion. Year-over-year decline from 2014 to 2015 was a further 21.9 percent, as the commodity super-cycle plunged towards its nadir.
Hans Timcke of Transaero suggested that carriers have no choice but to reduce their cost structure. “They have to sit it out and wait it out.” He acknowledged that “it sounds crazy,” but insisted that it was a matter of time before conditions improved. In the meantime, he is working on modernizing his business and going digital wherever possible.
“We’re in a cycle where currencies have devalued, so we’re in export mode,” said SkyTeam Cargo’s Hartmann. South America’s carriers, he said, are being squeezed by low-margin exports. “The dollar needs to weaken, then the rest of the world will be able to buy.” According to the Bank for International Settlements, the dollar’s share of FX exchanges accounts for 87.6 percent of all transactions, underscoring the importance of this dynamic.
Carriers transporting significant volume of cargo between South and Central America and the U.S. showed that, between 2014 and 2015, overall FTK’s moving into the latter declined by 12 percent, from 6.93 billion to 6.09 billion, according to USDOT statistics. Numbers such as these, which take into account cargo volumes between over 30 countries and almost half as many dependencies and territories suggest either a market shift, a profound downturn, or both.