Air freight demand continues to suffer from the effects of the US-China trade war, as figures fell again in May. Read more
A new report by Infrastructure Partnerships Australia and BIS Oxford Economics’ shows the goods travelling in the belly of international aircraft arriving and departing Australia are worth a massive $109 billion annually.
The 2019 International Airfreight Indicator, the latest report in Infrastructure Partnerships Australia’s data and measurement series, reveals that one in every five dollars of Australia’s traded goods travels via air.
“Every day, more than 550 international flights arrive and depart Australia, yet until now, we have been remarkably blind to the value, the type of commodity, and the economic contribution of goods that travel in the belly of these aircraft,” said Infrastructure Partnerships Australia chief executive Adrian Dwyer.
“The 2019 International Airfreight Indicator shines a light on a multi-billion industry that has historically gone unnoticed in our broader trade debate.
“The indicator shows that airports are crucial to our trade story, and the cargo transported beneath passengers is vitally important to airlines, airports and the Australian economy.
“Last year alone, $109 billion of international trade passed through Australia’s airports, with airfreight set to top $114 billion this financial year.
“Whilst airfreight only represents 1 per cent of Australia’s trade volume, it punches well above its weight in value.
“One in every $5 of Australia’s imports and exports travels via our airports – making the airfreight sector one of the largest value contributors to Australia’s trade position.
“In a period of heightened trade tensions and structural economic change, it’s critical that we use data like that presented in the 2019 International Airfreight Indicator to improve the way we plan, regulate and invest in our freight sector.
“Without useful data to examine and measure our freight sector we will be flying blind on our international trade.
“That is why we have called on Government to establish a dedicated freight body to independently measure and publish detailed analysis of the overall performance of our logistic and supply chain networks,” Mr Dwyer said.
Some of the findings:
- In FY2017-18, $109 billion of international trade passed through Australia’s airports, with more than 96 per cent of international airfreight passing through the four main capital city airports – Sydney, Melbourne, Brisbane and Perth.
- Whilst airfreight only represents 1 per cent of Australia’s trade volume, it represents 21 per cent of goods in trade value.
- The amount of goods flowing in and out by air is now 70kg for every person – a 60 per cent rise in the last five years. This reached a record high over FY2017-18.
- More than 80 percent of our airfreight is carried in passenger aircraft, with the balance carried in dedicated freight aircraft.
WorldACD reports that the enduring downward slide of air cargo volumes continued last month.
The first month of 2019 confirmed the trend we have seen for a number of months now: another volume drop, this time of 2% YoY, coupled with a yield drop (in USD) of 2.5%.
The smaller regions of Africa and Central & South America (C&S Am) again managed a YoY increase in outgoing business (by 3.8% resp. 0.6%), in the case of C&S Am accompanied by a YoY yield increase (in USD) of almost 5%.
All other origin regions were down YoY. For the origins Europe and North America, the drop hovered around 4%, but even more telling was the drop in incoming business in Asia Pacific (-6% in total, -8% from the origin North America, and -9.5% from the origin Europe).
Origin China grew by 5% YoY, but the destination China fell by more than 10%. We observed this trend also in the past two months, but it was more pronounced in January due to the early Chinese New Year (Feb 5 in 2019).
As we see it, the period preceding this day seems to have a small positive effect on outgoing business from Asia Pacific, but a more serious negative effect on incoming business.
The countries doing well in January were Morocco and Egypt in Africa, and Ecuador and Costa Rica in C&S Am. And what to say about the United Kingdom? Whilst all individual countries in Western Europe saw a YoY drop (- 5.5% in total), the UK grew by 5%…. Do we witness a pre-Brexit stocking up of goods made in Britain? Germany fared worst in Europe, with a YoY drop in outgoing air cargo of 8.7% (-14.5% to Asia Pacific).
On the product front, January 2019 was a good month for certain specific cargo categories. Apart from general cargo, valuables and dangerous goods, all categories improved YoY. The big categories of perishables and high tech grew by 6% resp. 4%, pharmaceuticals by 5% and the much smaller group of live animals by 9%.
Trying to find out which (groups of) companies may have best positioned themselves for a good performance in 2019, we looked who did relatively well in the ‘downturn’ of 2018, compared with the bumper year 2017.
In spite of an overall growth between the two years of 2%, most airline groups hardly grew: airlines from Asia Pacific reported 0.7% growth, whilst those from Africa, MESA and C&S Am languished around the no-growth point. Only the airlines from North America (+6.3%) and Europe (+3.8%) beat the worldwide average growth. Remarkably, the Europeans improved their share everywhere, except in Europe itself.
The world’s top-20 forwarders went from a 43.2% to a 43% market share. But within this elite group, differences were noticeable. The 13 forwarders with a European origin grew by 0.5% only, whilst the 4 MESA and North American forwarders did just a bit better (+1.5%). The real winners in 2018 were the Japanese forwarders, growing their business by 7.2%, mainly driven by growth in Asia Pacific and North America. Leading forwarders in perishables, such as Kuehne + Nagel, Panalpina, DB Schenker and Newport, recorded double digit growth (between 13% and 16%) in this category.
Lastly, GSA’s grew their business by 5.2%. The two groups dominating the GSA-field (ECS and WFC), representing around 30% of the total volume sold by GSAs, together grew by 3.7% i.e. less than the GSA-market as a whole. Their individual performances differed quite a bit.
January 2019 at a glance:
- Total Chargeable Weight: -2.0% year-over-year (YoY); -6.2% month-over-month (MoM).
- General cargo -5% YoY, special cargo +4.6% YoY.
- Direct Ton Kilometers (DTK’s): -1.9% YoY. (Given the -2% change in volume, this means that average distance per shipment hardly changed).
- Yield dropped to USD 1.84 (-2.5% YoY, -8.0% MoM).
- The cargo load factor dropped by 1.9%-points YoY and by 4%-points MoM.
- Revenues (USD) from the smallest shipments (0-50 kg) suffered least (-2.1% YoY), those from the largest shipments (>5000 kg) suffered most (-6.4% YoY).
(See www.worldacd.com/yields for more yield developments.)
The International Air Transport Association (IATA) has released full-year 2018 data for global air freight markets showing that demand, measured in freight tonne kilometres (FTK) grew by 3.5% compared to 2017. This was significantly lower than the extraordinary 9.7% growth recorded in 2017.
Freight capacity, measured in available freight tonne kilometres (AFTK), rose by 5.4% in 2018, outpacing annual growth in demand. This exerted downward pressure on the load factor but yields proved resilient.
Air cargo’s performance in 2018 was sealed by a softening in demand in December. Year-on-year, December demand decreased by 0.5%. This was the worst performance since March 2016. Freight capacity, however, grew by 3.8%. This was the tenth month in a row that year-on-year capacity growth outstripped demand growth.
International e-commerce grew in 2018, which was a positive factor for the year. Yet, there was a softening of several key demand drivers:
- The restocking cycle, during which businesses rapidly built up inventories to meet demand, ended in early 2018.
- Global economic activity weakened.
- The export order books of all major exporting nations, with the exception of the US, contracted in the second half of 2018.
- Consumer confidence weakened compared to very high levels at the beginning of 2018.
“Air cargo demand lost momentum towards the end of 2018 in the face of weakening global trade, sagging consumer confidence and geopolitical headwinds,” said IATA’s director general and CEO Alexandre de Juniac. “Still, demand grew by 3.5% compared to 2017. We are cautiously optimistic that demand will grow in the region of 3.7% in 2019. But with the persistence of trade tensions and protectionist actions by some governments there is significant downside risk. Keeping borders open to people and to trade is critical.
“To attract demand in new market segments, the air cargo industry must improve its value proposition. Enabling modern processes with digitalization will help build a stronger foothold in e-commerce and the transport of time- and temperature-sensitive goods such as pharmaceuticals and perishables,” Mr de Juniac said.
Airlines in all regions with the exception of Africa reported an annual increase in demand in 2018.
Asia-Pacific carriers posted the weakest growth of any region in December 2018 with a decrease in demand of 4.5% compared to the same period a year earlier. Capacity increased by 2.6%. The weaker performance in December contributed to growth in freight demand of only 1.7% in 2018 compared to 2017. Annual capacity increased 5.0%. The weaker performance of Asia-Pacific carriers in 2018 largely reflects a slowing in demand for exports from the region’s major exporters (China, Japan and Korea). Signs of a moderation in economic activity in China and an escalation of trade tensions continue to pose a downside risk to air cargo in Asia-Pacific.
North American airlines posted the fastest growth of any region for the seventh consecutive month in December 2018 with an increase in demand of 2.9% compared to the same period a year earlier. Capacity increased by 4.5%. This contributed to an annual growth in demand in 2018 of 6.8%, matching the rate of capacity increase. The strength of the US economy and consumer spending have helped support the demand for air cargo over the past year, benefiting US carriers.
European airlines posted a 1.9% year-on-year increase in freight demand in December 2018 and a capacity rise of 3.7%. The improved performance in December contributed to an annual growth in demand for air cargo of 3.2% in 2018. Capacity increased by 4.3% in the same year. Weaker manufacturing conditions for exporters, particularly in Germany, one of Europe’s key export markets, along with mixed economic indicators impacted demand in 2018.
Middle Eastern carriers’ freight volumes increased 0.1% year-on-year in December and capacity increased 4.5%. This contributed to an annual increase in demand of 3.9% in 2018 – the third fastest growth rate of all the regions. Annual capacity increased 6.2%. The region continues to be affected by geopolitical issues.
Latin American airlines experienced a decrease in year-on-year demand of 0.1% in December after three months of positive growth. Capacity increased by 6.0%. Despite a decrease in demand, it’s worth noting that the within South America market continues to perform strongly, with international demand up almost 20% year-on-year. Annual growth in freight demand among Latin America carriers in 2018 increased by 5.8% – the second fastest of all regions. Annual capacity increased 3.4% in 2018.
African carriers’ saw freight demand decrease by 2.2%, in December 2018, compared to the same month in 2017. This was significantly less than the 9.4% decrease the previous month. Capacity increased by 4.9% year-on-year. It’s worth noting that seasonally-adjusted international freight volumes, despite being 7.7% lower than their peak in mid-2017, are still 50% higher than their most recent trough in late-2015. Annual growth in freight demand among Africa carriers in 2018 decreased by 1.3% and capacity grew by 1%.
The ACCC will re-authorise the Qantas Emirates alliance as well as allowing Jetstar’s Asian brands to coordinate.
Qantas and Emirates
The ACCC is proposing to grant re-authorisation to an alliance between Qantas Airways Limited and Emirates for a further five years.
The global alliance covers Qantas’ and Emirates’ air passenger and cargo transport operations. The ACCC first authorised the alliance in 2013 for five years.
“The ACCC considers that the alliance is likely to continue to result in a range of public benefits,” ACCC Commissioner Roger Featherston said.
“Combining the networks of Qantas and Emirates provides customers with access to more flights and destinations under a single airline code and improves connectivity.”
“Loyalty program members will also continue to benefit from the ability to earn and redeem points on both networks and use lounge access and other reciprocal benefits,” Mr Featherston said.
“However, the ACCC is concerned that the alliance is likely to significantly impact competition on one route, Sydney to Christchurch; Qantas and Emirates are the two major operators on this route and their only competition is from the Virgin Australia and Air New Zealand alliance.”
To address this concern, the ACCC proposes to impose a condition requiring the Qantas and Emirates alliance to provide the ACCC with regular reports on seats and passengers flown, fares and route profitability. The condition would also allow the ACCC, at any time, to set a minimum level of capacity on the route. For example, if these reports indicated that the alliance was limiting the number of seats on this route to raise airfares, the ACCC would require the alliance to add extra seats.
In 2013 the ACCC imposed reporting and capacity conditions on four routes between Australia and New Zealand. However, since starting direct services between Auckland and Dubai in March 2016, Emirates has withdrawn from the Sydney to Auckland route, and will withdraw from the Melbourne and Brisbane to Auckland routes in March 2018. The ACCC considers that the capacity conditions are no longer required on these routes.
The ACCC is seeking submissions from interested parties on its draft determination before making a final decision on whether to re-authorise the conduct and impose conditions. Submissions are due by 7 March 2018.
The ACCC has also decided to re-authorise the continued coordination of three Qantas Asian-based joint ventures: Jetstar Asia, Jetstar Pacific and Jetstar Japan.
The Jetstar joint venture airlines are also seeking to coordinate with their shareholding airlines Qantas, Japan Airlines and Vietnam Airlines, on passenger and cargo services within Asia.
The decision continues an ACCC authorisation made in 2013.
By coordinating, the Jetstar-branded airlines are able to operate as a single fully integrated organisation on matters such as flight scheduling, sales and marketing, and pricing.
“The ACCC considers that continuing this coordination should lead to public benefits, such as better products and services, and more convenient flight times for consumers,” Mr Featherston said.
“This conduct is likely to result in little, if any, lessening of competition. Our view is the joint venture airlines would be unlikely to compete directly with each other or their owners in the absence of the proposed coordination.”
The re-authorisation does not extend to allowing coordination between the owners of any of the joint venture airlines.
The International Air Transport Association (IATA) has released data for global air freight markets showing that demand, measured in freight tonne kilometres (FTK), grew by 10.4% in the first half of 2017 compared to the first-half of 2016. This was the strongest first half-year performance since air cargo’s rebound from the Global Financial Crisis in 2010 and nearly triple the industry’s average growth rate of 3.9% over the last five years.
Freight capacity, measured in available freight tonne kilometres (AFTK), grew by 3.6% in the first half of 2017 compared to the same period in 2016. Demand growth continues to significantly outstrip capacity growth, which is positive for yields.
Air cargo’s strong performance in the first half of 2017 was confirmed by June’s results. Year-on-year demand growth in June increased 11% compared to the same year-earlier period. Freight capacity grew by 5.2% year-on-year in June.
The sustained growth of air freight demand is consistent with an improvement in global trade, with new global export orders remaining close to a six-year high. However, there are some signs that the cyclical growth period may have peaked. The global inventory-to-sales ratio has stopped falling. This indicates that the period when companies look to restock inventories quickly, which often gives air cargo a boost, may be nearing an end. Regardless of these developments, the outlook for air freight is optimistic with demand expected to grow at a robust rate of 8% during the third quarter of this year.
“Air cargo is flying high on the back of a stronger global economy. Demand is growing at a faster pace than at any time since the Global Financial Crisis. That’s great news after many years of stagnation. And, even more importantly, the industry is taking advantage of this momentum to accelerate much-needed process modernization and improve the value it provides to its many customers,” said Alexandre de Juniac, IATA’s Director General and CEO.
All regions experienced positive freight growth in the first half of 2017. Carriers in Asia Pacific and Europe accounted for two-thirds of the increase in demand.
Asia-Pacific airlines’ freight volumes grew 10.1% in June 2017 compared to the same period in 2016 and capacity grew by 7.8%. This contributed to a growth in freight demand of 10.1% in the first half of 2017 compared to the first half of 2016. Seasonally adjusted international freight volumes are now 4% above the level reached in 2010 following the global financial crisis bounce-back. Demand growth has been strongest, between 13-15%, on international routes within Asia as well as between Asia and Europe. Capacity in the region increased 4.8% in the first half of 2017.
North American carriers saw freight demand increase by 12.7% in June 2017 year-on-year and capacity increase by 3%. This contributed to strong growth in demand in the first half of 2017 of 9.3% in contrast to the negative growth seen during the same period in 2016. Capacity grew by 1.5% in the first half of 2017. Seasonally adjusted international volumes remain very strong, surging by an annualised rate of more than 30% in the second quarter. The strength of the US dollar continues to boost the inbound freight market but is keeping the export market under pressure.
European airlines posted a 14.3% year-on-year increase in freight demand in June 2017 and a capacity rise of 6.1%. The healthy results helped boost cargo volumes for the first half of 2017 by 13.6%. The ongoing weakness of the Euro persists in boosting the performance of the European freight market which continues to benefit from strong export orders. Capacity in the region increased by 5.4% in the first half of 2017.
Middle Eastern carriers’ freight volumes increased 3.7% year-on-year in June 2017 and capacity increased 2.2%. This contributed to an increase in demand in the first half of 2017 of 7.6%, well below the 10.8% average annual rate seen over the past five years. The slowdown in growth is mainly due to strong competition from carriers in other regions particularly on the Asia-Europe route rather than a significant decrease in demand which has continued to trend upwards at a solid rate of around 10% in annualized terms since early 2017. For the first time in 17 years the region’s share of total international freight flown in the first half of 2017 has fallen. Capacity in the region increased by 1.5% in the first half of 2017.
Latin American airlines experienced a growth in demand of 9.8% in June 2017 compared to the same period in 2016 – the fastest since November 2010 – and an increase in capacity of 2.9%. June’s positive results contributed to the region posting a marginal increase in demand of 0.3% for the first half of 2017. However, seasonally adjusted international volumes remain 10% lower than at the peak in 2014. Capacity fell by 0.6% in the first half of 2017. The region continues to be blighted by weak economic and political conditions, particularly in its largest economy, Brazil.
African carriers had the fastest growth in year-on-year freight volumes, up 31.6% in June 2017 and a capacity increase of 7.6%. This contributed to freight demand growing 25.9% in the first half of 2017 – the fastest of all regions. Demand has been boosted by very strong growth on the trade lanes to and from Asia which have increased by nearly 60% in the first five months of 2017. Capacity grew 11.2% in the first half of the year. Seasonally adjusted growth has levelled off in recent months; however, growth is set to remain in double digits for the remainder of 2017.
Ground-handling company dnata Australia has invested $1.5 million to install five state-of-the-art x-ray machines in Sydney, Melbourne, Brisbane, and Adelaide, in keeping with the mandated Piece Level Screening requirements for cargo consignments to the United States.
The new infrastructure has been put in place at the airports dnata operates in ready for the 1 July deadline. Along with changes to cargo screening that have been imposed by the Office of Transport Security (OTS) in conjunction with the US Transport Security Administration (TSA), dnata has identified improvements in operating procedures and provided training for their staff to ensure compliance with the increased security measures.
All cargo that passes through dnata’s facilities across Australia travelling to the US – either on a direct flight or via another airport – will be subject to the screening requirements.
The changes in cargo screening will impact airline carriers and the extended freight forwarding community, and dnata has been “working closely with customers, government authorities and other cargo terminal operators to ensure that the processes that are being evaluated are not only the most safe in the industry but also efficient and supported by our customers,” the company said in a press release.
Siemens Postal, Parcel & Airport Logistics (SPPAL) has been commissioned to install an air cargo centre at the international London Heathrow Airport.
International Airlines Group (IAG) issued the contract for IAG’s subsidiary British Airways.
Siemens is equipping a complete new cargo terminal, allowing the airline to profit from a substantial expansion of the existing air cargo capacities and an optimisation of complex cargo processes. The centre will contain with a’ fast-track facility’ – capable of processing particularly urgent air cargo in only 45 minutes.
“With our many years of experience and our in-depth knowledge of air cargo logistics, we will be able to help IAG strengthen their competitive position,” said Michael Reichle, CEO, Siemens Postal, Parcel & Airport Logistics.
“We are proud to have held our ground for years as a major player in the highly contested air cargo business,” added Sarah Coulson, Head of Strategy and Business Development, IAG Cargo.” Premium solutions such as the ability to process air cargo at short notice will help us to successfully keep ahead of the competition.”
In order to enable fast cargo handling, Siemens has developed a streamlined operational concept which avoids long distances and supports optimal use of the area with a surface measuring just 11,30sqm. Siemens will install a sophisticated system consisting of four elevating transfer vehicles (ETVs) and four transfer vehicles (TVs). The scope of delivery also includes three truck docks for loading and unloading, and four conveyor lines for build-up and breakdown. The air cargo centre with a throughput of 135,000 tons per year will have over 110 positions for unit load devices (ULDs). Siemens will also deliver 54 special cold storage and deep-freeze rooms for perishable goods.
Air services provider dnata has invested in a new 1,500sqm airside cargo facility at Adelaide Airport.
The facility was developed from an existing cold store facility and has the capacity to handle up to 80 tonnes of cargo per day, providing storage for both import and export products, including refrigerated and ambient temperature product options, and is designed to meet increasing demand for SA exports and imports.
Previously, dnata supported the South Australian cargo market from a 400sqm off-airport facility, that included interstate trucking services.
“Our customers have been calling for an airside facility and we are pleased to be able to meet this need. It has been a significant investment for us and we are committed to growing our business in Adelaide by opening this tailor-made, expansive airside facility,” said Daniela Marsilli, CEO, dnata Australia.
The insulation in the walls of the storage facility is nearly 25cm in width, ensuring the temperature within the general area of the facility remains between 15–25 degrees Celsius, while the freezer rooms are able to hold cargo at as low as minus 18 degrees.
The facility meets Customs, Quarantine and Office of Transport Security regulations, and will see dnata located the closest to the passenger terminal and new freighter apron at Adelaide Airport, enabling quick movement of cargo.
This new facility will be dnata’s fourth largest facility in Australia and will help to increase the company’s national footprint which currently includes cargo facilities in Sydney, Melbourne, Brisbane, Perth and Darwin.
Amazon announced on Tuesday that it intends to build a centralised air hub in Kentucky to support its growing fleet of Prime Air cargo planes.
“As we considered places for the long-term home for our air hub operations, Hebron quickly rose to the top of the list with a large, skilled workforce, centralised location with great connectivity to our nearby fulfllment locations, and an excellent quality of living for employees,” said Dave Clark, Amazon Senior Vice President of Worldwide Operations. “We feel strongly that with these qualities as a place to do business, our investments will support Amazon and customers well into the future.”
Last year, Amazon entered into agreements with two carriers to lease 40 dedicated cargo airplanes to support Prime members with fast, free shipping. Today, 16 of those planes are in service for Amazon customers with more planes rolling out. Amazon’s Prime Air hub at CVG airport will support Amazon’s dedicated fleet of Prime Air cargo planes by loading, unloading and sorting packages.
This latest news will come as no surprise to observers witnessing the e-commerce company’s acquisition of trailers, planes and shipping rights over the past months, while also filing patents for other, more ‘out there’, delivery approaches including tunnels, drones and flying warehouses.