Bankers Handicap Air Cargo 2008

     The airfreight market will continue to be one of the global growth sectors over the next few years, according to a study released December 12, by analysts at Hamburg, Germany-based HSH Nordbank AG.
     The following is an edited version of the bank’s study.
     According to HSH Nordbank, long-term global air cargo trade growth should be around 7% per annum in the next several years.
Asia Strongest Growth
     At present, nearly 40% of global trade in terms of the value of goods is transported via airfreight. The strongest growth in revenue-ton kilometers (RTK) is recorded on intercontinental routes, particularly between Asia/Pacific and Europe or North America.
     “As a consequence of further production relocations and above-average growth prospects for the region, it is expected that by the year 2025 almost 63% of all exports and imports will originate in, or be destined for, Asia/Pacific”, said Claudia Erdmann, a Nordbank analyst.
     In particular, the growth of the Chinese airfreight market is the driver of the entire Asian region, the report said. China’s domestic market will also be able to report growth rates averaging 11% p.a. over the next 20 years, driven by the pick-up in domestic demand.
Freight Rates Still Pressurized
     The downtrend in freight rates has decelerated in past. The slump in rates of the past few years has been halted particularly thanks to the implementation of ancillary cost surcharges for security and fuel. Furthermore, the proportion of special-type and thus higher-priced airfreight is rising, Nordbank said.
FedEx The Largest Airfreight Carrier
     With 15.145 billion, FedEx is the world's largest airfreight carrier in terms of RTK. With the establishment of a central hub in Guangzhou, FedEx gained a foothold in the fastest-growing export market at an early stage, thus securing its leading position over the long term. Air France-KLM follow with a total of 10.571 billion RTK. With the equity holding in Jade Cargo International, the first Chinese freight airline with foreign participation, Lufthansa Cargo attempts to enhance its positioning on the Asian market, the report said.
Rising Demand For Mega-Carriers
     Based on estimates by the two leading aircraft manufacturers, Airbus and Boeing, approx. 4,000 freight aircraft will be in use by 2025 respectively. While the segment of small carriers is forecast to decline from the current level of 42% to 36% by 2026, the proportion of medium-sized and mega-carriers is set to increase to about 31, respectively 33% percent.
     Of the 1,980 aircraft currently in use, 1,350 will have been decommissioned by 2026 due to obsolescence. New requirements will thus come to a total of 3,350 aircraft, of which about three-quarters will be covered by the conversion of existing passenger aircraft.
     All in all, 870 carriers will be delivered straight from the factory. 70% of these will be mega-carriers, Nordbank said.
Consolidation Among Cargo Airports
     Both inside and outside Germany, the transportation business has in the past few years shifted to a small number of cargo airports. “50% of the cargo carried worldwide is focused on a total of 23 airports,” said Ms. Erdmann.
     The world’s largest cargo airports are Memphis, Hong Kong and Anchorage. The airports in Asia and in the Near East reported the sharpest growth. For instance, the largest cargo airport is being set up in Dubai with an estimated handling capacity of 12 million tons of airfreight. In total, nearly €25 billion are being invested in this region. In Germany, about 65% of all airfreight transport is handled in Frankfurt am Main.
More Security Environment Spending
     As a result of the terrorist attacks, in-depth efforts are being made to increase checking capacity for airfreight. A security guideline adopted by the Transport Security Association (TSA) in May 2006 has made the existing provisions even stricter.      Virtually all airlines are now instituting surcharges to enable them to finance the corresponding infrastructure. Just as relevant for airlines and airport operators are provisions with respect to noise standards and prohibition of night flights, the report said.
Increased Growth From Deregulation
     The aviation sector is hoping for further growth impetus from the deregulation of the airfreight market. In spring the EU settled on an Open Sky Agreement with the United States, through which it is to grant comprehensive freedom rights to the airlines. Furthermore, next year the Single European Sky Initiative will be implemented with a view to creating a joint air space within Europe, the report concluded.
     The International Airfreight Study can be downloaded at www.hsh-nordbank.com.
George Frey