2014 State of Logistics: Air’s slight improvement despite headwinds

By Patrick Burnson, Executive Editor
July 01, 2014 - LM Editorial

As noted in the 25th Annual State of Logistics report, the airfreight industry has been facing chronic overcapacity and deteriorating yields. New details surfacing in similar new research mirror these findings.

Even though the overall airfreight logistics index has improved 4.4 points from June 2013, the June 2014 data contained in the Stifel Logistics Confidence Index suggests that the airfreight market still remains fragile, declining 1.9 points to 53.8. The present situation remained the same in May, with Europe to the U.S. the only lane to decline, down 2.0 points to 49.7.

The latest figures from the International Air Transport Association (IATA) for April indicate that while the freight market improved 3.2 percent above previous year levels, demand has not. Traffic levels in April were slightly below those of January and 1.1 percent lower than what was recorded in March.

IATA indicated that European airlines saw demand for air cargo fall by 0.7 percent compared to April 2013, marking a slower start for carriers as they entered second quarter—particularly as GDP growth in the Eurozone was just 0.2 percent in the first quarter.

However, a slightly different and more encouraging story for airfreight seems to be playing out in Asia, where preliminary traffic figures for the month of April showed some growth in international air cargo markets.

According to the Association of Asia Pacific Airlines (AAPA), international air cargo demand in freight ton kilometers (FTK) increased for regional carriers by 4.7 percent in April, on the back of sustained demand for Asian exports. However, freight load factors remained under pressure due to capacity expansion.

With offered freight capacity expanding by 5.3 percent, the international freight load factor averaged 64.3 percent in April, 0.4 percentage points lower than the same month last year.

“International passenger traffic demand continued to grow, with the region’s carriers registering a 5.2 percent increase in international passenger numbers during the first four months of the year,” says Andrew Herdman, AAPA director general. “This was on the back of an improvement in business and consumer sentiment in most economies worldwide.

During the same period, air cargo demand for the region’s carriers grew by 4.2 percent, thanks to an improvement in global trade conditions.”

Analyst Rosalyn Wilson makes a similar observation in her report, noting that passenger jets are carrying growing volumes of cargo in their bellies, taking market share from cargo freighters.

All cargo airlines carry more than 79 percent of revenue ton-miles of freight and commercial passenger carries account for the rest. The amount being carried by passenger jets has been increasing especially because there’s more room in the bellies of these aircraft with the proliferation of baggage charges. According to Wilson, belly cargo in passenger planes is very profitable, estimated at close to 65 percent, so passenger airlines have been pursuing it more aggressively.



About the Author

image
Patrick Burnson
Executive Editor

Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at .(JavaScript must be enabled to view this email address).


Subscribe to Logistics Management magazine

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your
entire logistics operation.
Start your FREE subscription today!

Recent Entries

You’ve heard the old saying, it was the best of times, it was the worst of times. Rob Handfield sees this as the best of times for procurement professionals, who have an opportunity to deliver real value to their organizations

While core metrics were down from a very impressive July, the August edition of the Non-Manufacturing Report on Business from the Institute of Supply Management (ISM) was still very strong.

The Clean Cargo Working Group (CCWG) has released a report indicating that in 2014 average CO2 emissions in the global container shipping trades declined 8.4 percent from the year before.

UPS Freight, the less-than-truckload (LTL) subsidiary of UPS, recently announced it has rolled out a new service center facility in Franklin Park, Illinois. This is the company’s fifth Chicago-area service center along with other ones in Aurora, Chicago, Palantine, and South Holland.

Putting the renewed strength in the truckload market into a very positive perspective is a report issued by Avondale Partners analyst Donald Broughton, which was released yesterday. Entitled, “Q2’15 Trucking Capacity; Goldilocks Era Continues,” Broughton explained that in the second quarter only 70 truckload fleets failed, or exited the business. That number may seem high to some, but it is not, especially when you consider that the second quarter of 2014 saw more than five times as many truckload carriers, 375 to be exact, exit the business.

Comments

Post a comment
Commenting is not available in this channel entry.


© Copyright 2015 Peerless Media LLC, a division of EH Publishing, Inc • 111 Speen Street, Ste 200, Framingham, MA 01701 USA