North America trends represent a question mark

In May, Etihad Cargo announced a second air cargo route in and out of Rickenbacker International Airport in Columbus, Ohio. The bump-up of freighter service out of Rickenbacker came to accommodate Trinity Logistics, which carries apparel from the Indian subcontinent to US retailers, and to support US export growth to Europe, the Middle East, and Asia.

Turns out, the new service was instrumental in the increase in air cargo numbers boasted recently by Rickenbacker and symbolic of the resurgence of air cargo markets globally in recent months. Cargo imports and exports at Rickenbacker rose 21 percent in the first half of 2017, and the airport credited that spike largely to the increased service from Etihad and Trinity Logistics, as well as a 2016 Emirates expansion and the June 2016 opening of Air Cargo Terminal 5.

The new Etihad service out of Rickenbacker—which began May 12—serves Colombo, Columbus, and Abu Dhabi, while the first service—which began in the summer of 2016—continued to operate on the Colombo–Columbus–East Midlands–Abu Dhabi route. Victoria’s Secret, GAP, Nike, Tommy Hilfiger, Speedo, and Abercrombie & Fitch are some of the retailing importers taking advantage of the new services from the Indian subcontinent. Aviation components manufactured by Lockheed and Raytheon form a major part of the increased US exports being carried on the flights.

Air Freight Growth 2017

Air cargo globally also posted impressive results for the first half of 2017, said to be the best first half-year growth since 2010. Global air cargo markets began showing signs of life late last year after several years of stagnation.

The International Air Transport Association (IATA) said global air cargo demand grew by healthy 10.4 percent in the first-half of 2017 as compared to the same period last year. That figure represents the strongest first half-year performance since the end of the Great Recession and almost triple the industry’s average of 3.9-percent growth over the last five years.

The trend appears to be fairly strong, as June’s results showed year-on-year demand growth of 11 percent—although that was a fall-off from the 13 percent shown in May—and freight capacity grew by 5.2 percent year-on-year in June. All regions experienced positive freight growth in the first half of 2017, according to IATA, and carriers in Asia-Pacific and Europe accounted for two-thirds of the increase in demand.

“Air cargo is flying high on the back of a stronger global economy,” said Alexandre de Juniac, IATA’s Director General and CEO. “Demand is growing at a faster pace than at any time since the global financial crisis. That’s great news after many years of stagnation.”

The sustained growth of air freight demand is consistent with an improvement in global trade, de Juniac added, with new global export orders remaining close to a six-year high. But, he warned, there are signs that the cyclical growth period may have peaked.

“The global inventory-to-sales ratio has stopped falling,” de Juniac said. “This indicates that the period when companies look to restock inventories quickly, which often gives air cargo a boost, may be nearing an end. Regardless of these developments, the outlook for air freight is optimistic with demand expected to grow at a robust rate of eight percent during the third quarter of this year.”

North American carriers saw freight demand increase by 12.7 percent in June 2017 year-on-year and capacity increase by three percent. This contributed to strong growth in demand in the first half of 2017 of 9.3 percent in contrast to the negative growth seen during the same period in 2016. Capacity grew by 1.5 percent in the first half of 2017. International volumes surged by an annualized rate of over 30 percent in the second quarter.

Dollar Boosts Inbound Demand

The strength of the US dollar boosted the inbound US air freight market in the first half of 2017, according to IATA, while keeping the export market under pressure. The fall of the dollar against world currencies in recent days raises the question over whether that trend could shift. (See sidebar above.)

The strength of air cargo markets was also confirmed by first-half financial results reported by several airlines. Delta Cargo, for example, saw second-quarter 2017 revenues up 10.9 percent year over year to $183 million.

United Cargo revenues were up 22.1 percent, year-over-year to $254 million in the second quarter, on increasing volumes. In addition to rising demand for air cargo services, United entered a joint venture with Lufthansa Cargo in April, covering cooperation on capacity and the alignment of booking and handling processes.

Cargojet, a Canadian air freight carrier, reported a revenue increase of 11.2 percent in the second quarter to $88.2 million. The carrier operates a fleet of 18 freighters and moves 1.3 million pounds of cargo every night across its North American network.

“The significant increase in revenues over the previous year was the result of the successful execution of our strategy to improve the utilization of our aircraft assets and to maximize margins,” said Ajay Virmani, the company’s president and chief executive officer.

Atlas Air Worldwide recently reported quarterly results showing earnings of $29.1 million, a 44-percent increase over the same period a year ago. “Our growth reflected an increase in aircraft utilization and a rise in commercial charter yields,” said William J. Flynn, the company’s CEO. During the quarter, Atlas started flying for Cathay Pacific and Yangtze River Airlines and added four 767-300 freighters for Amazon.

“We are experiencing good momentum in our business, and we expect that to carry through 2017, into 2018 and beyond,” said Flynn. “As a result, we are increasing our full-year 2017 outlook.” Flynn expects Altas’ income in 2017 to grow in the mid-teens over 2016.

Atlas also recently entered into an agreement to operate three 747-400s for Hong Kong Air Cargo. “We have a strategic focus on the fast-growing Chinese and Asian markets,” said Flynn. “We also continue to move more deeply into the faster-growing express and e-commerce markets.” Over 70 percent of Atlas’ current freighters operate for customers in those markets, and that percentage is expected to increase, as the airline ramps up from the six aircraft it flies for Amazon currently to the expected 20 by the end of next year.