The weekly newspaper for air cargo professionals Volume: 17


Issue: 49 15 December 2014


Airfreight trends are troubling A


ir cargo is cheaper than in 2010, carriers could benefit from falling oil prices, but there are long term trends that


are troubling, the International Air Transport Association’s


(IATA) chief economist states at its cargo media day, held on 9 December in Geneva. On-shoring, near production and the rise of rail and sea freight from Asia to Europe are all long term trends being driven by higher Asian incomes and the rela- tive price of consumer electronics. With factories being moved from China to Mexico, for example, to benefit from relative cheaper labour costs, the trans-oceanic freighter flight is facing possible less demand. IATA’s chief economist, Brian


Pearce, tells the cargo media day: “We are seeing some on-shoring of production for good economic reasons. Former very low cost producer areas, and China, have gone through a period of sharply


rising labour costs, labour costs have more than doubled in the last decade, so relatively cost advan- tages are less.” An airfreight trend that Pearce


pointed to is the fact that the average cargo rate is 15 per cent cheaper than in 2010, but this year’s 40 per cent fall in the oil price could help carrier’s margins. “Fifty per cent of [airline’s] fuel is hedged, so they are locked into the price. The impact of the lower [oil] spot prices will take a little time to come through,” says Pearce, add- ing that he expects airfreight to


get cheaper. While cargo is getting cheaper, IATA’s October 2014 air- lines financial monitor (see below) states that as a whole, airlines made net, post tax, profits of $7.1 billion in the third quarter of 2014, down from $7.3 billion during the same period of 2013. In the association’s Economic


Performance of the Air Transport Industry report, published last week, it is predicting, that for 2015 a net industry profit of $25 billion will be achieved, thanks to the fall- ing oil price (see page four). Another trend Pearce identified


evAns depArts sWiss to promote ChAnge


as confronting airfreight is the fall in price of consumer electronics. As they become cheaper, manu- facturers are ready to send the products using rail freight. The IATA cargo media day heard of the example of consumer electronics firm HP of it sending its printers by rail from China to Europe. The modal shift to sea freight has been a debated topic for years now, but IATA and advisory service company Seabury Group have concluded the move is real. A joint study found that sea freight has been taking a larger share. Pearce presented data at the


cargo media day that identified a minus 1.5 per cent annual decline in airfreight’s share of world trade every year since 2000, with a brief pause in 2010 before the decline resumed until stabilising in the last 18 months. Pearce also blamed increase government pro- tectionism, using standards and government rules around domes- tic sourcing, as slowing the world recovery.


us and Asia pacific lead revival of 5.4%


Freight tonne kilometres (FTK) in October have seen a year-on-year rise of 5.4 per cent because of improving economic conditions in the US and strong trade in Asia Pacific, according to the International Air Transport Association (IATA) airlines financial monitor. The region seeing the largest rise in FTK in


October was the Middle East, up 13 per cent. Africa saw the next highest rise of 9.6 per cent, followed by Asia Pacific at 6.7 per cent. Latin America was up 4.1 per cent, followed by North America at 3.1 per cent. Europe saw the smallest rise of 1.4 per cent. FTKs for the total market rose by 5.4 per cent in October. IATA says: “Airfreight volumes continue to


expand ... supported by improving economic conditions in the US and strong trade growth in Asia Pacific.” It says airlines have also been helped by crude oil prices falling by 36 per cent


from the mid-year peak of $122 per barrel. IATA says the jet fuel price was $86 dollars a barrel as of 5 December, which is down 32.9 per cent on one year ago. The drop has been attributed to the strength of the US dollar and growth in supply, particularly in the US. This, IATA says, has offset geopolitical threats from other oil producing nations. Airlines, as a whole, made net post tax prof- its of $7.1 billion in the third quarter of 2014, down from $7.3 billion during the same period of 2013. This is because of weak cargo revenues and rising costs for Chinese carriers suffering from a weak currency, the yuan renminbi. The third quarter results are an improvement over the first two quarters of 2014. In the first quar- ter airlines made a total net post tax loss of $1 billion, and in the second quarter made a net post tax profit of $3.4 billion. During the third


quarter, North American airlines made a net post tax profit of $3 billion, compared to $2.8 billion in the same period of 2013. European airline profits rose to $2.6 billion, up from $2.1 billion in the third quarter of 2013. Airlines in Asia Pacific saw profits fall to $1.3 billion in the third quarter of 2014, down from $2.1 billion in 2013. Latin American airlines saw third quarter profits drop to $20 million from $123 million during the same period of 2013. The freight load factor in October was 47 per cent, up from September when it was 45.5 per cent, but down on the yearly high of March, when it was 48.7. The load factor was highest in Asia Pacific at 56.6 per cent in October and lowest in Africa at 32.2 per cent. Europe, Latin America and Mid- dle East saw similar load factor percentages of 47.1, 46 and 44.5, respectively. The load factor in North America was 37.6 per cent.


four Airlines join Asl With fArnAir buy


joint venture begins With 2 deC hnd-lhr flight


2014: A good yeAr despite strong CurrenCy


World Air Cargo Awards 2015


AIR CARGO WEEK WORLD AIR CARGO AWARDS will be taking place at the Bayerischer Hof Hotel on the evening of 6 May at a Gala Dinner. Azura International (formerly A-Z Group) is proud to present the awards, along with its co-organiser of the Air Cargo Europe (ACE) 7th exhibition and conference, Messe Muenchen - organ- iser of transport logistic, the exhibition that runs parallel to ACE and has about 50,000 visitors from 110 countries. Air Cargo Europe occurs from 5 to 8 May and the Air Cargo Week World Air Cargo Awards are as follows: Airfreight Forward- er of the Year, Air Cargo Handling Agent of the Year, Air Cargo Charter Broker of the Year, Airport of the Year, Air Cargo Gen- eral Sales Agent of the Year, Air Cargo Industry Customer Care Award, Air Cargo Industry Achievement Award, Informa- tion Technology for the Air Cargo Industry Award and Cargo Airline of the Year. The venue for the Gala Dinner is the Bayerischer Hof, a hotel located in the heart of Munich. Originally conceived by King Ludwig I, the Bayerischer Hof boasts great views across Munich and the Alps. Since the hotel was first built in 1841, it has been completely renovated and modernised.


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