As we enter the second half of the year, performance figures for May from the industry’s leading research firms are painting a rather dismal airfreight picture for the rest of 2015. The International Air Transport Association (IATA), WorldACD and Drewry have all reported disturbingly low air cargo rates and yields, while overcapacity continues to grow each month.
Global freight tonne kilometers (FTK) grew by just 2.1 percent in May, compared to the same month in 2014, marking the slowest rate of growth for the year to date, according to IATA’s figures. At the same time, capacity expanded again, this time by 4.3 percent, year-over-year. For the year so far, freight volumes are up by 4 percent, y-o-y, but most of that growth, IATA pointed out, came in late 2014, during the U.S. West Coast port crisis.
“Cargo growth has undoubtedly come off the boil,” said Tony Tyler, IATA’s director general and CEO. “The expansion in volumes we saw in 2014 has ground to a halt, and load factors are falling. Some economic fundamentals still point to a rebound in the second half of the year, but we have to recognize that business confidence is flat and export orders in decline.” He added that there is also the possibility of another economic shock to come if the “Grexit” occurs, referring to a possible exit of a defaulting Greece from the Eurozone.
With the exception of the Middle East, which saw an 18.1 percent rise in demand, carriers in most other regions of the world saw either weak growth or contractions. Airlines in North and Latin America, IATA said, reported that their freight business shrunk in May 2015, y-o-y. Carriers in the Asia-Pacific sector grew by only 2.8 percent, y-o-y.
“This week, governments are meeting in Geneva to discuss ‘aid for trade’ and the World Trade Facilitation agreement,” Tyler added. “If implemented, this could boost world GDP by up to US$1 trillion. I urge governments worldwide to bring down the barriers to facilitate trade that will accelerate prosperity and innovation.”
The May figures from data analysis firm World ACD were no less troubling, with May worldwide volume growing a disappointing 1.8 percent, compared with May 2014, while global yield, measured in U.S. dollars, was down by 2 percent compared to April.
The only bright spots, WorldACD said, were in the perishables and pharmaceutical markets, with “the former playing a much larger role than the latter in terms of volumes.” Worldwide growth in May was “completely driven” by perishables (at 7 percent) and pharma (13 percent). The Middle East/South Asia region saw a 24 percent, y-o-y, growth in perishables in May.
There was, however, some optimism in WorldACD’s commentary. “Further analysis is required to find out whether this would not, on balance, be good news for airlines,” the company said. “Yet, it may be hard to establish the impact of lower fuel prices and shifts to all-in pricing. At this stage, we state cautiously that there has again been a slight increase in yields excluding charges.”
The latest figures from Drewry’s East-West Air Freight Price Index showed that cargo rates have hit their lowest level since the inception of the index May 2012. The decline is credited to softening demand and overcapacity. The airfreight price index had fallen 3.4 points to 89.8, the first time ever that the price has fallen to less than US$3 per kilogram. For May, the index read $2.91, as opposed to $3.22 a year earlier.
“Compared with the same month last year, the index was 12 points adrift, reinforcing the view of emerging market weakness precipitated by slowing demand growth and excess capacity,” the report said. “Drewry expects air freight pricing to remain weak over the next few months, as carriers release additional passenger capacity to cope with the northern hemisphere summer holiday season.”