Pressure on yields in the commercial airfreight market and a decline in military cargo volumes will challenge Atlas Air Worldwide's expected profitability in the second half of the year, says the cargo company in a statement released ahead of its third quarter earnings call on 7 November.
The peak holiday season for commercial shipments will be “much less robust” than expected, says Atlas Air Worldwide, the parent company of Atlas Air and Titan Aviation Leasing and a majority shareholder of Polar Air Cargo.
“Together, a lower-than-expected commercial airfreight market and lesser expected military cargo demand have reduced anticipated profitability for the third and fourth quarters of 2013,” says the cargo company in a release.
To mitigate these market challenges, Atlas Air is diversifying its fleet with new, more efficient models such as the Boeing 747-8 freighter and the Boeing 777 freighter and adding new charter and aircraft leasing services.
"The initiatives we have undertaken to strengthen our core ACMI operations, diversify our business mix, and enhance our operating efficiency have enabled us to continue to generate significant profitability despite soft commercial charter market yields over the past three years and a material reduction in U.S. military cargo demand that we have long prepared for," says Atlas Air president and chief executive officer William Flynn in a release.
United Parcel Service executives noted the peak season shortening this year during a call with investors and noted that it could be an opportunity or a risk depending on the weather conditions. It expects its daily volume to be up 8% between 29 November and 25 December.
"The late Thanksgiving creates a compressed peak season, which presents some operating challenges," said Kurt Kuehn, UPS’ chief financial officer in an earnings release.
IATA says that its latest cargo report released this week shows “cautious optimism” and expects business confidence to pick up by the end of the year. Freight tonne kilometres (FTKs) grew 0.5% year-over-year in September and were flat when compared to August, however performance varied regionally. North American carriers saw 0.9% in cargo growth in September compared to the same month in 2012, while Asia-Pacific airlines’ FTKs dropped 3.1%. European carriers saw 1.4% in growth, with volumes the highest since mid-2011.