‘Specialty’ air cargo on the up, but traditional ‘core’ shipments take a dive

Source: The Loadstar
Date: 31st October 2023

The air cargo market has seen a strong decline in what might be termed its ‘traditional core business’, in contrast to some ‘specialty’ shipments which have recorded strong growth.

Quoting data from WorldACD, if looking at the product mix, some products are holding up better than others under current market conditions.

For example, volumes of perishables are up 4% while pharma is relatively “inelastic” (0%). However, the economic effects are clear on express (-17%) and general cargo (-12%), including some e-commerce, and dangerous goods (-12%).

There is a positive trend in hi-tech and ‘vulnerable’ (+7%), “which probably has something to do with some new product launches, but we are not sure yet whether this is sustainable”.

Live animals and valuables saw increases of 5% and 2%, respectively.

London Heathrow’s head of cargo highlighted a number of verticals performing well for the UK gateway.

On imports, live animals are the primary growth area, as more passengers are travelling with their pets than last year. The only UK airport with the ability to handle all animal species. Pharma and perishables remain key export growth areas, alongside tech,” London Heathrow said.

Consumer electronics and e-commerce are mainly responsible for the current slight upturn [in demand].

“Retail remains largely sluggish, while pharmaceuticals – which has seen little or no decline – remains stable compared with previous years. More anecdotally, industrial projects flows, linked either to the logistics of major projects or to oil exploration and exploitation, are up sharply.”

Air France KLM Martinair Cargo was optimistic about the market, noting that Air France KLM Martinair Cargo expected growth to return to the previous annual trend of rising 2%-3% in 2024.

Although this had been expected to happen this year, the airline is now set to record a decline in volumes for 2023 of some 5%, reflecting “the impact of constraints on globalisation due to geopolitical effects” – an allusion to the Ukraine-Russia and Israel-Palestine conflicts.

On major tradelanes, such as Asia-Europe and Asia-North America, Q3 remained in line with previous quarters. Demand continues to be sluggish and supply (capacity) is tending to increase, due in particular to the rise in passenger traffic over the summer.

Early indications for Q4 suggest we will benefit from a slight increase in demand, due to both new product launches in the consumer electronics sector and e-commerce demand.

As for the peak season, it will probably be a little better than was feared a few weeks ago, but a long way from the highs of the pre-2019 years, particularly for Asia-Europe flows.

Looking further ahead, once the consumer electronics and e-commerce seasonal ‘rebounds’ have passed, the chances are that demand will remain weak in the first quarter of 2024.

Neither the forecasts for a recovery in consumption nor [a reduction] in stock levels point to a rapid return to better days.

The mood at London Heathrow, however, is decidedly upbeat, with the airport’s global cargo traffic in September rising 7% on the same month last year, to 122,011 tonnes, thanks in large part to strong Asia Pacific volumes of 32,081 tonnes (+25.9%).

We have outperformed 2022 tonnage every month this year since July, so there is definitely a sense of the market improving in H2.

When compared with our European peers, Heathrow’s strong bellyhold network means we have just the right balance of capacity at regular frequencies to service demand, with forwarders favouring this over comparatively more expensive and less frequent dedicated freighters.

We are on track to end 2023 in a comparable position with 2022, despite the industry’s turbulent year.

Given Heathrow’s degree of connectedness as a hub airport, and the consequent build-back of bellyhold capacity through our passenger network, we are optimistic about a stronger 2024 than this year.

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