Asia airlines encounter tapered cargo demand in September

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Qatar_Airways_Cargo_AirbusAir cargo markets were weak in September for Asia-Pacific airlines, hardly posting growth from year-ago levels, according to traffic figures from the Association of Asia Pacific Airlines (AAPA).

Demand in freight tonne kilometer (FTK) terms remained subdued in the month and only matched the same month last year, it said. After accounting for a 2.3% increase in offered freight capacity, the average international freight load factor fell by 1.5 percentage points to 62.7% for the month.

Andrew Herdman said the airfreight business has weakened in recent months following the slowdown in world trade. The region’s carriers experienced a 1.1% year-on-year decline in air cargo demand during the third quarter of 2015, after registering a 4.5% increase during the first half of the year. As a result, air cargo growth for the first nine months narrowed to 2.6% compared to the same period last year.

Herdman said, “The operating environment for Asian airlines remains challenging, complicated by the effects of slowing economic growth in emerging markets, and associated exchange rate volatility. However, the continued growth in travel demand and lower oil prices have been a positive factor, helping to keep air fares affordable. Overall, Asia Pacific airlines’ profitability is showing modest improvement in an intensely competitive market.”

IATA business confidence survey

Similarly, the latest business confidence survey among airline CFOs and heads of cargo by the International Air Transport Association (IATA) revealed the same sentiments on the industry’s outlook.

Results of the third quarterly survey of IATA released in October showed that respondents pronounced a positive growth outlook for both passenger and cargo businesses, but not at the strong pace that was expected earlier in the year.

“This likely reflects concerns over weakness in the global business environment and emerging market economies,” said the report.

Other highlights of the new study showed that airline profit expectations for the year ahead have fallen further but remain positive. The rate of expected improvement in profitability over the next 12 months has fallen in October compared to the first quarter, suggesting that improvements in key drivers might have peaked earlier in the year.

Moreover, it is growth in passenger volumes, coupled with falling input costs, that is driving  gains in profitability, as growth in cargo volumes is now broadly flat on the year-ago period, which is consistent with FTK data and the lackluster demand backdrop;

Consistent with the lower input costs, the survey also showed weakness in yields in both businesses, for the recent past and the coming year.

Photo: Alf van Beem