CARGO E-CHARTBOOK Q OVERVIEW

Transcription

1 CARGO E-CHARTBOOK Q OVERVIEW Airline cargo businesses are starting to see a slightly better demand environment and further improvement in forward looking indicators, but continued increases in capacity have kept downward pressure on yields and revenues. Air freight growth has improved in compared to, in line with positive cyclical developments in business conditions. Business confidence has been on the rise since the start of Q. Consumer confidence in Europe is at the highest levels since, and stronger economic performance has stopped earlier declines in Chinese consumer confidence. These developments have supported a rise in demand for air-freighted commodities like semi-conductors. But expected gains have been limited by an onshoring of production, which has limited international trade growth. Moreover, continued increases in capacity have countered the modest improvements in demand, causing yields to decline. This trend could continue as new aircraft deliveries come into service in. Cargo heads surveyed in October remain broadly optimistic, expecting yields to improve slightly over the next months, supported by views of an increase in traffic growth. Economic Situation the global economic growth in has been weak overall, but the outlook for is more positive, in both advanced and emerging economies (page ) Traffic Growth has improved in compared to, in line with positive cyclical developments in business conditions, but growth ahead could be dampened by trends in production which suggest a shift toward domestic activity (page ) Demand Environment continues to show signs of improvement. Business confidence has been increasing since the start of Q and although world trade growth remains soft, expansion in emerging market trade volumes has picked up slightly over recent months (page ) Demand Drivers also look more positive. Consumer confidence in Europe is now the highest it has been since and Chinese consumer optimism remains has stabilized. Capital investment intentions of Japanese companies remain positive. These developments have supported a rise in demand for air-freighted commodities like semi-conductors (page ) Capacity freight load factors have bottomed out but remain low as capacity enters through the passenger fleet. No growth in freighters has contained further decline in asset utilization rates, but new aircraft deliveries are set to expand the existing widebody fleet by 7% in. (page ) Competition air freight rates remain in decline. At the same time, sea freight rates appear to be rebounding slightly as a result of strong ocean container demand, but still remain down on a year ago (page ) Revenue and Yields air freight yields continue to weaken. Although there has been some improvement in air freight demand over recent months, capacity growth has kept load factors low (page 5) Costs jet fuel prices have risen slightly over recent weeks despite gains in supply. As a result, cargo profitability continues to face downward pressure, even with softness in nominal wage rates (page 5) Profitability outlook consistent with the improvement in the demand backdrop, the outlook for air freight more positive according to heads of cargo surveyed in October. The expectation is for traffic volumes to increase over the next months and for yields to rise slightly (page 5) IATA Economics

2 % banks % banks Difference in % GDP over previous year Loosening Tightening Cargo echartbook Q Economic Outlook & Traffic Growth Global economic growth has been subdued throughout (), but developments over recent months suggest a slightly better outlook for. Conditions in both advanced and emerging economies are expected to improve. However, this growth has not generated the expansion of international trade that it would have done in the past, as production has been on-shored () partly due to market factors such as rising wages in low cost economies and partly due to a recent rise in protectionist measures. The Bali trade deal on trade facilitation may help to improve this situation. In the Euro area, improving economic performance since Q should carry into when growth is expected to be modestly positive. Tightening fiscal policy and bank lending standards ( & ) will likely contain US growth to below % in, but this is an improvement on. And in emerging market economies, after a moderation in growth in, growth should pick-up again in. There has been a slight improvement in air freight growth in compared to (), but rates of expansion are still little better than flat on major routes including those connected to the Far East (5). The modest pick-up in air freight demand is consistent with cyclical improvements in business conditions Forecasts for GDP growth Source: EIU 8 8. Freight Traffic Growth Source: IATA, ACI Domestic Freight Volumes (ACI) International Freight Volumes (ACI) International FTKs (IATA) US Japan Euro Area ASPAC excl Japan Latin America Middle East North Africa Sub- Saharan Africa World Goverment Cyclically Adjusted Fiscal Balance Source: IMF United States Euro Area Japan China India Russia Brazil % 5% % % % % % -% -% -% -% 5. International Freight growth by major routes Source: IATA ODS Europe - Far East Within Far East North Atlantic North and Mid Pacific 8 European Banks US Banks. Bank credit conditions Source: ECB, Federal Reserve Tighter Credit Standards Ratio of World Trade to domestic Industrial Production Source: Netherlands CPB Looser Credit Standards 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, 5= % Growth, Semi-Conductor Shipments % growth - International FTKs Cargo echartbook Q Demand Environment & Drivers The demand environment for air cargo continues to improve slowly. Business confidence, a key indicator of air freight growth, has been increasing since the start of Q (8). World trade growth remains soft (7) but there has been a slight pick-up in emerging market import and export volumes. There is still no sign of an inventory overhang, suggesting businesses have no immediate need to reduce their reliance on quick transportation of cargo (9). Demand drivers are also looking more positive. European consumer confidence has improved significantly throughout, now at the highest levels since (). The US consumer economic outlook was dampened slightly by the recent Government shutdown, but confidence levels remain solid. In China, consumer confidence has stabilized as a result of better economic performance in Q, following some decline earlier in the year. These developments have supported a pick-up in demand for air-freighted commodities, as indicated by expansion in semi-conductor shipments (). Monetary policy stimulus in Japan has encouraged intentions for capital expenditure. Capital investment intentions of UK companies remain broadly stable () World trade in goods and air FTKs Source: Netherlands CPB and IATA (Seasonally Adjusted) International FTKs (left scale) World goods trade volumes (right scale) 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 -5 JP Morgan Manufactuerers PMI (+ months) International FTKs 8 China US Europe (right scale) Total Business inventories to sales ratio and FTKs Source: US Census Bureau and IATA 7. Capital spending intentions Source: Haver Analytics 5. Inventories to sales ratio 8 5 Japan business (right scale) 5. - FTKs - -5 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 Cargo echartbook Q Capacity & Competition Freight load factors and aircraft utilization rates have bottomed out after decline during much of (). The modest improvements in demand have buoyed load factors despite increases in capacity through the passenger fleet, but levels remain low. Stability in the freighter fleet has helped sustain aircraft utilization rates (). Looking ahead, however, the expected increase (%) in of deliveries of new twin-aisle aircraft with belly hold capacity could place downward pressure on aircraft utilization rates, adding 7% to the existing widebody fleet. Air freight rates continue to contract (7). Sea freight rates appear to be rebounding as a result of improvements in sea transport demand, but remain in contraction. Demand for container shipping is showing stronger growth in the Americas and in the Far East (8). Despite some growth in the Eurozone economy over recent months, demand for Asian goods moved by air has remained stable; there have been no growth on this key air freight market when compared to the precrisis peak (). 7 5 Freighter fleet in service. Cargo fleet composition Source: IATA, Ascend Widebody pax fleet in service 5% % % % %. EU Trade with Asia % change from pre-crisis peak June 8 - Seasonally adjusted monthly data in tonne (Source: International Transport Forum) Asia to EU by sea EU to Asia by sea Asia to EU by air EU to Asia by air 9 % 7 5 -% -% -% -% End of year totals End of month totals. Freight load factor and freighter aircraft utilization (Seasonally adjusted) Freight aircraft utilization Freight Load Factor 5% 5% 9% 7% 5% % % 9% 7% % 8% % % % % -% -% -% 7. Ocean container and air freight rate growth Source: Drewry, CASS Ocean container Air freight Twin Aisle Aircraft Deliveries by Airline Region Source: Ascend Other Middle East North America Europe Asia Pacific 8 8. Container Shipping Volume Growth by Region Source: Drewry Aug- Jul- Aug North America North Europe Far East Middle East Latin America IATA Economics:

5 % Growth y-o-y in nominal wages % Growth y-o-y in nominal wages (China) Weighted Score Decrease Increase F F Revenues (US$ billion) % Growth US$ per kilo US$ per kilo % of Revenues Cargo echartbook Q Revenues, Costs & Profits Air freight yields continue to weaken (9). Although the decline in load factors has stabilized over recent months, levels remain low. Jet fuel prices are up slightly in November, continuing to trend in the range of the past three years () despite recent gains in supply. And although nominal wage rates appear to be softening (), high fuel costs continue to place downward pressure on profits (). Looking ahead, however, the outlook for air freight is becoming more positive. Consistent with the improvement in the demand backdrop, heads of cargo surveyed in October expect an increase in traffic volumes over the next months as well as a small improvement in yields () 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% % % % % -% -%. Profitability of US Cargo Only Airlines Source: US BTS Operating Profit Margin Net Profit Margin. Jet Fuel and Crude Oil Price ($/barrel) (Source: Platts, RBS) 8 Jet fuel price Global Airline Industry Cargo Revenues Source: ICAO, IATA Cargo Revenues % Growth % % % % % 8 Crude oil price (Brent) 5 -% -% -5 -% 7 5 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: 5

6 Cargo echartbook Q 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.%.%.%.%.%.% Europe - Far East -.% -.7% -.% -.%.5% -.5% Europe - Middle East.% 8.8% 8.8% -.7% -.5% -.% Within Far East.8%.% -.% -.9%.% -.% Within Middle East.%.%.%.%.%.% Within South America 5.5% 5.% -5.% -5.9% -8.% -.% Mid Atlantic -.%.% 7.9% -.8%.% -.% Middle East - Far East.5%.%.8% 8.8% 5.%.% North Atlantic -.8%.%.7% -.% -.%.7% North America-Central America -.% -.% -.% -8.% -.5% -7.7% Europe - Africa -5.% -.% -7.7% -8.% -8.% -5.5% North America South America.% 9.5% 8.%.%.9% 8.% Far East - Southwest Pacific 5.% -.5% -8.% -8.% -.% -.% North and Mid Pacific.%.8%.7% -.5%.8% -.% South Atlantic.% -.% -8.% -.9% -5.5% -.7% Within Europe -.% -.7% -.% -.8% -.% -5.7% Table. Outbound CASS Market Revenues (incl. fuel and other surcharges) % Growth in Air Freight Revenues, year-on-year US$m Origin Region Q Q Q Q Q Q Q Africa Caribbean Central America Europe Japan & Korea Middle East North America South America South East Asia Table. Inbound CASS Market Revenues (incl. fuel and other surcharges) US$m % Growth in Air Freight Revenues, year-on-year Destination Region Q Q Q Q Q Q Q Africa Caribbean Central America Europe Japan & Korea Middle East North America South America South East Asia IATA Economics:

7 Cargo echartbook Q Glossary 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