 Well,
it is that time of year again, and I am sure most of the movers and shakers
in the global air cargo industry are packing their bags and getting ready
to head to San Antonio for the annual CNS Conference. Arguably
the best networking conference in the industry, I am sure this year will
be no different, with a great deal of business getting done in all the
conference rooms at the resort.
As we all wing our way towards SAT, let’s take
a temperature check on how the industry is doing so far in 2014.
Volumes Up
The very good news is that volumes are up yoy in Q1!
It has been a long time since we could celebrate expanding
volumes, and more importantly, the volume trends look pretty positive
as we head into Q2 and Q3.
While some regions have benefitted more than others,
the general trend is positive.
I spend a great deal of time in the perishable market
and air freight has been very strong this year, and things are looking
very good with respect to demand for this summer, especially to Australia,
the Middle East, and Asia.
But What About Yields?
Getting back to the market as a whole, while volumes
are on the positive side of the ledger, there is some bad news: yields
continue to head in the wrong direction and there is very little sign
that this trend will reverse anytime soon.
In reviewing Q1 financial reports from several airlines,
all saw yields decline yoy. Unfortunately, this trend isn’t going
to reverse itself until we get equilibrium between supply and demand.
Some capacity has evaporated, with several freighters
being retired from service this year as a result of bankruptcies (Evergreen,
ACG, and World) as well as shrinking fleets on the combination front (AFKL,
BA etc.) but we still need a lot more freighter capacity to come out of
the air , and the sooner the better.
Bellies Freighters
I believe that while the increase in belly capacity,
due to the resurgence on the passenger side of the business, has been
discussed at length, the impact on the industry is still not being taken
as seriously as it should.
Recently on several occasions, AA has loaded over 45
tons of freight and mail on its flight 136 between LAX and LHR.
Yes, that is right—45 tons.
Who needs a freighter?
I believe this AA 777-300 carried more freight between
LAX and LHR than a 767F would have been able to carry, leaving aside the
massive P&L difference between cargo carried in the belly hold versus
a freighter. Granted the passenger loads were light on these days and
the normal number would be closer to 30-35 tons, but the point is that
the new passenger planes have been designed and powered to maximize the
cargo capability, which is going to put massive pressure on freighter
economics for the foreseeable future.
This trend, along with shortening supply chains due
to near sourcing, will reshape our industry over the coming years, making
bellies and regional freighters more important than the intercontinental
variety.
Finally, I would like conclude by extending my warmest
congratulations to Des Vertannes on his retirement from IATA. While it
is hard to see yet another statesman of the industry retire, he has accepted
a much more rewarding position as full time husband, father, and grandfather.
Des is a guy who has always carried himself with grace
and dignity.
He did what every executive hopes to do—he left
his business in much better shape than when he found it.
This is no small feat in our industry, given all of
the distractions and lack of focus as day-to-day decisions often overwhelm
long term strategic planning.
Some accomplishments include moving e-awb penetration
to 13 percent at the end of 2013, with 68 airlines and 825 forwarders
as signatories to the multi-lateral e-awb agreement; the formation of
GACAG and closer cooperation between the industry’s pre-eminent
associations, and successfully raising the profile of the air cargo industry.
Des was also able to deftly navigate the politics of IATA and we can only
hope that his successor will have the skills necessary to carry this legacy
forward.
It is very important that we see an increased number
of younger professionals engaged in our industry because the old guard
is quickly looking toward greener pastures.
Let’s hope we see some new faces this week at
CNS.
|
