CARGO E-CHARTBOOK Q OVERVIEW

Transcription

1 CARGO E-CHARTBOOK Q4 OVERVIEW Airline cargo businesses continue to face difficult conditions with demand for air freight falling in Q4, yields continuing to trend downward, and oil prices remaining high. Although world trade volumes continue to expand, growth has slowed as the European economy contracts overall in. Not surprisingly, European confidence fell further in Q4, as reflected in depressed demand for air-freighted commodities including semiconductor shipments. Furthermore, capital investment intentions by Japanese and UK companies remain weak. But there were some positive indications in the demand backdrop. There is still no sign of an inventory overhang, and the decline in business confidence seen throughout Q has now reversed. Moreover, consumer confidence in the US has improved over the last few months, which could offset some of the downward pressure on demand coming from Europe. And although freight load factors and aircraft utilization rates have declined on the back of falling demand and continued fleet expansion, cargo heads surveyed in October are optimistic for the year ahead. Economic Situation - global economic growth for remains weak at just over %. Emerging economies continue to outpace developed counties. Looser monetary policy and bank lending standards have helped the US grow at a faster rate than Europe (page ) Traffic Growth - air freight volumes fell in Q4 as weakness in developed country economies dampened demand for air-freighted goods (page ) Demand Environment remains weak but with some promising signs. Although world trade growth has slowed, business confidence has reversed its downward trend and is suggesting stability in the months ahead. Furthermore, there is still no sign of an inventory overhang (page ) Demand Drivers are weak overall. Consumer confidence deteriorated further in Europe, depressing demand for air-freighted commodities like semi-conductors, a key customer. Furthermore, capital investment intentions by Japanese and UK companies continue to decline. US consumer confidence has improved, however, and that could help offset some of the downward pressure on air freight volumes (page ). Capacity - freight load factors slipped in Q4, consistent with the drop in volumes. Additions to the freighter and widebody fleet have caused asset utilization rates to decline further. Moreover, the trend may continue in the months ahead, as new aircraft deliveries have expanded the existing widebody fleet by % this year. Air freight rates remain weak (page 4) Competition - sea freight rates and volumes are growing solidly. Emerging regions are generating most of the growth in container shipping, while weaker developed country economies are offering no support to air freight markets. (page 4) Revenue and Yields - air freight yields are showing a declining trend overall, as falling demand and excess capacity weaken load factors (page ) Costs - jet fuel prices declined % from the recent September peak, but levels remain high, close to $/barrel. And despite nominal wage rate growth slowing further in the US, Europe and China, net profits continue to experience downward pressure (page ) Profitability outlook has improved, with both air freight demand and yields expected to increase over the next months, according to heads of cargo surveyed in October. This is consistent with improvements in business and consumer confidence in some regions (page ) IATA Economics

2 % banks % banks FTK Billion FTK Billion Difference in % GDP over previous year Loosening Tightening Economic Outlook & Traffic Growth Cargo echartbook Q4 As the year comes to a close, global economic growth estimates for remain weak at just over %, with only a slightly better outlook for (). European economic growth contracted in while the US and Japan are set to improve on last year. Looser monetary policy and bank lending standards () in the US have helped that economy grow faster than Europe. Banks in Europe are maintaining tight lending standards, helping reduce the risk of another banking credit crisis but also creating a more challenging environment for private investment activity. Emerging regions continue to grow at a much faster pace than Western economies, with governments of Russia, India and China maintaining relatively looser fiscal positions (). And despite softer economic growth in compared to, Asia Pacific, Africa and Latin America are all expected to see stronger growth next year. Weakness in developed economies has driven the fall in air freight demand, with important markets linked to Europe showing the most decline in Q4 (4&). Freight-only carriers are faring better in the weak demand environment () Forecasts for GDP growth Source: EIU 8 4 Domestic Freight Volumes (ACI) International Freight Volumes (ACI) International FTKs (IATA) 4. Freight Traffic Growth Source: IATA, ACI US Japan Euro Area ASPAC excl Japan Middle East North Africa Sub- Saharan Africa Latin America World -8. Goverment Cyclically Adjusted Fiscal Balance Source: IMF % 4%. International Freight growth by major routes Source: IATA ODS Within Far East North and Mid Pacific % % United States Euro Area Japan China India Russia Brazil -% -4% -% Europe - Far East North Atlantic 8 4 European Banks US Banks. Bank credit conditions Source: ECB, Federal Reserve Tighter Credit Standards Air Freight Carried by freighter or Belly Hold (Airline Sample, Seasonally Adjusted) Source: IATA Belly Hold Looser Credit Standards Freighters (left scale) (Chart ): Airline sample scaled up according to Freighter/Belly-hold split in Airbus Global Market Forecast 7 - IATA Economics:

3 Inventories to sales ratio FTKs (billion) Net balance intending to increase investment Net balance intending to increase investment % Growth YoY Balance expecting improvement, index Balance expecteting improvement, net % Billion FTKs index of world trade, = % Growth, Semi-Conductor Shipments % growth - International FTKs Cargo echartbook Q4 Demand Environment & Drivers The demand environment for air cargo remains soft, but there are some promising signs. Although world trade continues to expand (7), the pace of growth has been slowing as weakness in European economies persists. However, declines in business confidence signalled by the Purchasing Manager s Index throughout Q have now reversed and stability is indicated for the months ahead (8). Moreover, there is still no sign of an inventory overhang, meaning businesses have no immediate need to reduce quick transportation of cargo (). Demand drivers are weak overall. European consumer expectations of economic improvement have declined further () and this appears to be the main reason for the depressed demand for air-freighted commodities, as indicated by the decline in semi-conductor shipments (). Furthermore, capital investment intentions by Japanese and UK companies have remained weak in Q4 (). A positive development, however, is the improvement in US consumer confidence over recent months, reaching levels not seen since early 8 (). This could help offset some of the downward pressure on air freight demand, coming mainly from Europe, in the months ahead World trade in goods and air FTKs Source: Netherlands CPB and IATA (Seasonally Adjusted) International FTKs (left scale) World goods trade volumes Semi-Conductor Shipments and Air Freight Source: IATA, SIA International FTKs Semi-Conductor Shipments Purchasing Managers confidence survey and Air Freight Demand Source: IATA, Markit/JP Morgan. Consumer confidence Source: Haver Analytics 4-8 China JP Morgan Manufactuerers PMI (+ months) International FTKs 4 Europe US Total Business inventories to sales ratio and FTKs. Source: US Census Bureau and IATA 8 7. Capital spending intentions Source: Haver Analytics.4. Inventories to sales ratio Japan business FTKs - - UK business (left scale) IATA Economics:

4 Number of Aircraft % Growth, Year-on-Year Average daily hours flown % available freight tonne capacity Number of aircraft Capacity & Competition Cargo echartbook Q4 After remaining stable throughout the first half of the year, freight load factors fell at the start of Q4 (4). The recent decline in air freight demand contributed to the fall in load factors, as did the increase in the freighter fleet (). Fleet expansion has also placed downward pressure on aircraft utilization rates, which declined significantly over recent months (4). Moreover, the trend may continue in the months ahead, as deliveries of new twinisle aircraft with belly hold capacity will have increased by over % in compared to, expanding the existing widebody fleet by % this year (). Air freight rates, which have been declining since early, remain weak (7). By contrast, sea freight rates and volumes are showing solid growth (7 & 8). Emerging regions are generating most of the growth in container shipping, where developing economies are demanding more bulk commodities. Developed country economies, which are growing at a fraction of the pace of emerging regions, are offering no support to air freight markets. Increased economic weakness in the Eurozone has seen demand decline for Asian produced consumer goods. Air freight volumes from Asia to Europe have once again fallen below 8 pre-crisis levels, after showing improvement early in the year (). 4 Freighter fleet in service. Cargo fleet composition Source: IATA, Ascend Widebody pax fleet in service % 4%. EU Trade with Asia % change from pre-crisis peak June 8 - Seasonally adjusted monthly data in tonne (Source: International Transport Forum) % % 8 7 -% -4% -% Asia to EU by sea EU to Asia by sea Asia to EU by air EU to Asia by air End of year totals End of month totals 4. Freight load factor and freighter aircraft utilization (Seasonally adjusted) Freight Load Factor Freight aircraft utilization % 48% 4% 44% 4% 4% 8% % 8% % 4% % % -% -4% -% 7. Ocean container and air freight rate growth Source: Drewry, CASS Ocean container Air freight 4. Twin Aisle Aircraft Deliveries by Airline Region Source: Ascend Other 8. Container Shipping Volume Growth by Region Source: Drewry Middle East North America Europe Asia Pacific 8 7 Mar- Aug- Sep North America North Europe Far East Middle East Latin America IATA Economics: 4

5 % Growth y-o-y in nominal wages % Growth y-o-y in nominal wages (China) Weighted Score Decrease Increase Revenues (US$ billion) % Growth US$ per kilo US$ per kilo % of Revenues Revenues, Costs & Profits Cargo echartbook Q4 Air freight yields continue to trend downward overall, despite small improvements seen in Q and during more recent months (). The weakness in air freight demand coupled with excess capacity from declining load factors continues to place yields under downward pressure. Jet fuel prices have dropped % below the most recent peak in September, but levels remains high at just below $/barrel (). And despite nominal wage rate growth slowing further in the US, Europe and China (), net profits continue to experience downward pressure (). However, the outlook for air freight is more optimistic, according to heads of cargo surveyed in October. The positive sentiment is consistent with improvements in business and consumer confidence in some regions. Head of cargo are expecting increased traffic growth over the next months, and as a result, the outlook for yields is also more optimistic (4) Air Freight Yields (US$ per kilo) Source: IATA CASS SE Asia-Europe SE Asia - Europe (incl. Other charges) Global total - LHS Global (incl. Other charges) - LHS % % 8% % 4% % % -% -4%. Profitability of US Cargo Only Airlines Source: US BTS Operating Profit Margin Net Profit Margin Jet Fuel and Crude Oil Price ($/barrel) Jet fuel price Crude oil price (Brent) 7 4. Global Airline Industry Cargo Revenues Source: ICAO, IATA Cargo Revenues % Growth 4% % % % % -% -% Jan7 Jan8 Jan Jan Jan Jan F -% 7 4 USA European Union China P.R.. Nominal Wage Growth Source: Haver Analytics IATA survey of heads of cargo Volumes - next months Yields - next months IATA Economics:

6 Cargo echartbook Q4 Air Freight Routes and Direction Table. International Freight Volume Growth by Route Area (Source: IATA ODS statistics) % Growth in Freight Tonnes, year-on-year Route Area Apr- May- Jun- Jul- Aug - Sep - Africa - Middle East.8%.8%.%.%.%.4% Europe - Far East -7.4% -.4% -.% -.7% -.%.% Europe - Middle East.%.%.%.% 8.%.7% Within Far East -.%.4%.4% -4.% -.%.% Within Middle East 8.4% 8.4%.% 4.%.4%.% Within South America -.% -.% 8.8% -.%.%.8% Mid Atlantic -.% -7.%.% -.7%.% -.4% Middle East - Far East.%.8%.%.4%.4% 8.% North Atlantic -.7% -.% -.% -.7% -.% -4.% North America-Central America -.% -.% -.% -4.% -4.% -7.7% Europe - Africa.% -.7%.7% 4.%.%.% North America South America 4.7% -4.% -.% -8.% -.% -.7% Far East - Southwest Pacific -.7% -.4% -.8%.% -.% -.4% North and Mid Pacific -.% -7.7% -.% -.7% -.8%.% South Atlantic -.% -.% -.% -.4% 4.% -8.% Within Europe -.% -.%.8% -.%.%.% Table. Outbound CASS Market Revenues (excl. fuel surcharges) % Growth in Air Freight Revenues, year-on-year US$m Origin Region Q Q Q Q4 Q Q P Q Africa Caribbean Central America Europe Japan & Korea Middle East North America South America South East Asia Table. Inbound CASS Market Revenues (excl. fuel surcharges) US$m % Growth in Air Freight Revenues, year-on-year Destination Region Q Q Q Q4 Q Q P Q Africa Caribbean Central America Europe Japan & Korea Middle East North America South America South East Asia IATA Economics:

7 Glossary Cargo echartbook Q4 ACI: Airports Council International AFTK: Available Freight Tonne Kilometers European CB: European Central Bank EIU: Economist Intelligence Unit CASS: Cargo Accounts Settlement System FT: Financial Times FTK: Freight Tonne Kilometers PMI: Purchasing Managers Index Netherlands CPB: Netherlands Bureau for Economic Policy Analysis ODS: Origin-Destination Statistics SIA: Semiconductors Industry Association US BTS: US Bureau of Transportation Statistics M-o-m Month over month percentage change Y-o-y Year over year percentage change IATA Economics th December IATA Economics: 7