A look back at the cargo market – IATA Q1 cargo chartbook synopsis

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Finally, a bit of good news? After a continued gloomy outlook and results for most of 2012, 2013 is causing a modest sense of optimism for the coming year. The International Air Transport Association queried cargo heads in January 2013 and found they expect yields to remain stable and volumes to increase over the next 12 months.

What’s behind this positive trend? A mix of factors including a slightly improved global economic outlook, an increase in demand environment and demand drivers leading to higher capacity and the profitability outlook continues to progress. World trade growth remains slow and jet fuel prices are high, but overall air cargo businesses did experience better operating conditions in recent months leading to the encouraging attitudes.

The current levels of business confidence point to slight growth in the months ahead, driven by stronger performance of the US and Chinese economies and finally some stability in the Eurozone. Although global economic growth is predicted to be at just over 2%, emerging regions should see faster growth than Western nations. Specifically, Asia Pacific, Sub-Saharan Africa and Latin America are all expected to see stronger growth in 2013 compared to 2012. Some good news is also coming out of Europe - UK companies are looking to make more capital investments and there is hope for steadiness in the Eurozone. Coupled with this are the improving consumer outlooks in both Europe and the US and no sign of inventory overhang. This has translated into some increase in demand for air-freighted commodities.

The slightly stronger demand has also been seen in the improvement in freight load factors over the past several months, however, sea freight rates are continuing to show strong growth. The Far East is generating most of the growth in container shipping; strong Asian economies are also sustaining demand for air freight commodities from Europe. The reverse is not seen – the economic weakness in the Eurozone means transport from Asia to Europe, both by sea and air, has declined.

While yields appear to be stabilizing, with recent months even showing a slight improvement, the rise in yields has been carried by the stronger demand for air freight and the ensuing improvement in load factors. Downward pressure on net profits remains from ongoing high fuel prices along with high input costs.  Also, aircraft utilization rates continue to decline due to fleet, both passenger and freighter, expansion. This trend looks set to continue for the next few months as the existing wide body fleet is set to grow by 6% this year.

The improved demand backdrop means 2013 will hopefully see an increase in volumes, stable air freight yields and an improved profitability outlook. Welcome relief after a dismal 2012.

Cargo market analysis chartbooks are published quarterly on IATA web pages.

Text by Jacy Meyer
 

Published April 16, 2013

Category: Market updates

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