European airport gateways feel cargo slump

European airport gateways feel cargo slump

There are no clear skies in sight for air cargo that has had a dismal first half with mounting concerns that the weakness in global markets will affect the end-of-year peak season. Photo credit: Shutterstock.com.

The freight performance of Europe’s airports in the first six months of 2019 has been dismal, with just three of the top 10 cargo gateways recording year-over-year growth.

Data from the Airports Council International (ACI) Europe shows that of the top 10 airports, growth in the first half was recorded only by Madrid, Barcelona, and London. Frankfurt, the busiest air cargo airport in Europe, recorded a decline of 2.5 percent compared with the first six months of last year.

Overall, air freight handled by Europe’s airports was down 3.5 percent year over year.

Olivier Jankovec, director general of ACI Europe, said after weak June results were revealed, it did not bode well for the months ahead.

“The slump in freight traffic is where it really bites at the moment,” he said. “And it is not getting any better, with June registering a drop of 7.1 percent, the worst monthly performance in more than seven years.”

July cargo figures for Air France-KLM show the slumping freight markets are not improving. Transported tonnage for the Franco-Dutch carrier was down almost 6 percent year over year during the month.

Autos hit the brakes

Europe’s largest forwarders were also hit by the worsening air freight markets in the January through June period. Denmark’s DSV said the air freight market declined 5 percent in the first half; it put much of the blame for the poor performance at the feet of the downtrading auto sector.

Europe’s car industry reported an 8 percent drop in sales in June, the ninth monthly decline in the last 10 months. Daimler A.G. issued a profit warning in July, citing weak global markets, and BMW reported its first loss in a decade in May.

“The fact that the air freight market is down 5 percent year to date is worrying,” said Jens Bjørn Andersen, CEO of DSV. “We are struggling to figure out what is driving this negative volume in air freight apart from automotive. You speak to one customer and he tells you one thing, but speak to another and he tells you almost the opposite. I think that some of the emergency shipments that we saw a year ago have gone and their supply chains are being managed more efficiently now.”

International Air Transport Association (IATA) data shows European airlines posted a 3.6 percent decrease in freight demand in June. Softening the blow were comparatively strong cargo volumes transported within Europe that minimized the impact of weaker German exports.

Globally, the picture for the first half remained dismal with IATA reporting that tonnage carried in June marked the eighth consecutive month of year-over-year decline in freight volume. Demand, measured in freight ton kilometers (FTKs), decreased 4.8 percent in June compared with the same period in 2018.

“Global trade continues to suffer as trade tensions — particularly between the US and China — deepen. As a result, air cargo markets continue to contract,” said Alexandre de Juniac, IATA director general and CEO.

Trade tensions

Those cargo tensions hit Asian carriers especially hard, as most have long-haul cargo operations that fly trans-Pacific routes. The lackluster business sentiment fed into lower demand for air shipments. As a result, the region's airlines in June recorded a 7.2 percent year-over-year fall in air cargo demand, according to the Association of Asia Pacific Airlines (AAPA).

Andrew Herdman, director general of the AAPA, said Asian airlines saw a 6.2 percent decline in air cargo demand in the first half, reflecting the prevailing weakness in international trade flows with widening trade disputes and higher tariffs disrupting global supply chains.

Looking ahead, Herdman was not optimistic. “With moderating global business optimism levels and the absence of significant progress in trade negotiations, air cargo demand is expected to remain weak,” he said.

Hong Kong-based Cathay Pacific is an AAPA member with a strong focus on the trans-Pacific freight market, so the carrier was hit hard by the gloomy trade environment. The airline’s cargo revenue fell 11.4 percent compared with the first six months of 2018.

Attempts to improve the profitability of Cathay Pacific’s cargo division are being frustrated by expanding airline capacity as additional belly space from new long-haul passenger aircraft comes online. In the first six months of the year, yield declined almost 3 percent.

But John Slosar, chairman of Cathay Pacific, is expecting more from his carrier in the second half.

“Our airlines [Cathay and Dragonair] normally achieve better results in the second half of the year than in the first half and, despite headwinds and other uncertainty, we expect this to be the case in 2019,” he said.

Contact Greg Knowler at greg.knowler@ihsmarkit.com and follow him on Twitter: @greg_knowler.