Ex-Asia Air Cargo
Decline Holding Steady

     Or in this case, monthly tonnage figures.
     It’s true that numbers can be used to tell more than one story as Disraeli and others have famously noted through the years. But the latest round of public utterances from Asia’s airlines and airports confirm what FlyingTypers has been reporting for some time - ex-Asia lanes are, almost without exception, showing few signs of improving in the build up to the traditional peak season.
     Figures for September were certainly resoundingly downbeat. The Association of Asia Pacific Airlines (AAPA) said the region’s carriers saw volumes -measured in freight tonne kilometres (FTK) - contract 6.5% in September compared to a year earlier, with higher offered freight capacity pushing the load factor down 3.5 points to 63.8%.
     Cargo volumes at China’s airports fell 3.5% to 506,000 tonnes in September as international traffic contracted by 8.9% to 151,500 tonnes. And the pattern was confirmed at the world’s largest airport by tonnage in 2010, Hong Kong International Airport (HKIA), which also failed to buck the disappointing trend. HKIA saw yet another year-on-year decline with exports down 7.6% for the month.
     HKIA’s leading cargo handler, Hong Kong Air Cargo Terminals Limited (Hactl), said its volumes fell 11.5% year-on-year. Cathay Pacific, which hubs at HKIA, said its liftings for its services and those of Dragonair fell by more than 10% in September compared to a year earlier.
     "On the cargo side there was no significant change [in September] from the situation in August, with the key Hong Kong and China markets both remaining soft and demand to long-haul destinations, particularly Europe, below expectations,” said James Woodrow, (left) Cathay Pacific General Manager Cargo Sales & Marketing.
     Earlier this year executives at a number of airlines and airports were confidently predicting a silver lining in the late third and early fourth quarters despite the doomladen year-on-year monthly reports that have been gushing forth for much of 2011. Early 2010 had seen major restocking after the cuts of 2009, so the theory went, so comparisons with the relative normality of 2011 were misleading. A more ‘traditional’ 2011 with a late year surge starting in September and October was just round the corner, they believed.
     The September figures have removed what little doubt was left that a major recovery in demand was on the way. “There is no sign yet of the traditional year-end peak beginning,” admitted Woodrow.
     Indeed, if anything this year’s figures have been remarkably consistent, as consistent as the draining slurry of negative economic indicators that had been spewed forth by Europe and the U.S., whose under-performing economies are the main cause of the poor freight environment ex Asia.
     Tonnage uplifted by Cathay Pacific and Dragonair, for example, was down 6.4% in the first nine months of this year compared to a capacity increase of 9.8%.
     Over the same period cargo demand, as measured in FTKs by the AAPA, is 4.1% lower than in 2010 and this is now having a major impact on carriers, particularly those located in Asia, which tend to derive a larger proportion of revenue from freight than their peers in the West.
     “A slowdown in export demand, as a result of the ongoing European economic crisis and softening North American economies, contributed to the fall in overall cargo traffic,” said Andrew Herdman, AAPA Director General. “As a result, Asian airlines have seen only modest revenue growth this year.
     “At the same time, airlines have had to grapple with a 40% increase in jet fuel prices, squeezing what are typically already very thin margins.”
     It is hard to see any major bounce-back in the final quarter with most lead indicators suggesting that October will prove to have been as bearish as the rest of the year, a negative trend set to be exacerbated for airlines by the terrible floods that have beset Thailand and other parts of the South East which have already impacted air cargo volumes and are expected to have supply implications into next year.
     The General Administration of Civil Aviation of China (CAAC) said in late October that it expected air cargo tonnage handled at the country’s airports to total around 5.6 million tonnes this year, the same as in 2010, due to the poor global economic outlook. Previously CAAC had predicted year-on-year growth of 11.5%.
     Lilian Chan, Executive Director of Hactl, said that 2010 had been an exceptional year but admitted that it was now clear that the downturn this year was being caused by more than just unfair statistical comparisons.
     “Our traffic levels are still above the pre-recession peak of 2008,” she said. “But there is no doubt that throughput is now being impacted by global uncertainty, fuelling soft consumer demand for non-essentials.
     “We are confident this will ease in due course, but we believe the last quarter of 2011 will disappoint many, and 2012 Q1 will also be tough.”
     The one exception to the overall downward trend for cargo this year during September was to be found at Singapore.
     One exception to the negative growth trends evident across Asia in September was Singapore, with volumes at Changi growing year-on-year, albeit, not by much (2.2%). While those based in the city state will be pleased that they’re bucking the market, it should be noted that Changi’s year-on-year figures are skewed by its relatively poor performance last year. Indeed, as FT has previously noted, higher costs have seen its cargo performance remain static for much of the past decade.
SkyKing

FT102811