Just in case we need any further evidence that 2009 was really, really bad for business, Seattle air freight analyst Air Cargo Management Group tells us the year just gone was "by far the worst year ever for the industry in terms of year-over-year performance".
A new analysis from the group points to a full-year decline of about 15% for international air freight volumes. And, notes managing director Robert Dahl, despite the severe year-end downturn full-year international revenues for 2008 held at the $87 billion racked up in 2007.
But for 2009, full-year results will tell a different story: volume was down and falling fuel surcharges pushed freight yields down by double-digit amounts. "As a result, many airlines are reporting drops of 35-40% in freight revenue," he says.
Dahl's figures are based on volume - number of consignments shipped - and exclude domestic business, but his basic conclusions tally with the international and domestic freight-tonne-kilometre data compiled by the International Air Transport Association. IATA figures (see chart) had the industry globally down 10.1% for the full year 2009, after dropping just 4% in the full-year 2008.
Both sets of figures show cause for optimism. Dahl admits it is too early to call this recovery sustainable, but notes: "Traffic levels early in 2009 were no higher than in 2000, suggesting the industry had lost a full decade of growth."
However, he says, the late-year 2009 return to growth has left traffic at more like 2003 or 2005 levels. The analysts expect 7-10% growth in 2010 and a return to the pre-recession peak by 2012.
TALE OF TWO SECTORS
Dahl's analysis distinguishes between traditional airline freight operations, which offer airport-to-airport services in the bellyholds of passenger liners or dedicated freighters, and express carriers, which offer complete door-to-door service. In that sector, the big players with 20-25% of the market each are the US leaders UPS and FedEx Express, and DHL, owned by Deutsche Post. Fourth with a roughly 13% share is the Dutch post office's TNT.
The express companies began a period of aggressive international growth about 10 years ago when FedEx and UPS began expanding overseas and the sector generally moved to take advantage of European loosening of national postal service monopolies. Express companies have also grown beyond their traditional small-parcels businesses to deal with larger consignments for corporate clients, who like the "one-stop shop" service they provide.
They have also proved more robust in recession than their airline rivals, says Dahl. Express companies offer a range of differentiated services - overnight, two-day, and so on - to give customers some price flexibility. Airlines, by contrast, have not been successful at distinguishing between, say, next-flight versus next-available flight services.
The result, he says, is that the express sector contracted last year much less severely than the cargo industry as a whole, losing only 6.9% volume internationally.
Dahl's growth expectations depend on the general health of the "fragile" global economy.
Fuel prices are also key. When oil started to surge in 2008, says Dahl, freight operators added fuel surcharges to support revenue, albeit at the expense of volume.Cheaper road, rail or sea alternatives remain attractive in recession, and even at today's $60-70 per barrel oil prices are putting a brake on air cargo growth prospects, says Dahl.
Further ahead, Dahl says cargo prospects will depend also on whether globalisation trends resume after the recession. Air cargo companies will do well if manufacturers continue to source supplies from a global market. But, if the trend is to favour local or regional suppliers, then air freight will be less attractive.