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Qatar- Solid backdrop for air cargo financial performance

(MENAFN – The Peninsula) The Peninsula DOHA: Air freight tonne kilometres (FTKs) grew by 7.4 percent year-on-year in the three months ended January globally a robust pace by historical standards. However, the quarterly seasonally adjusted (SA) pace of volume growth slowed once again, according to IATA.
IATA’s Q1, 2018 chart book indicated demand for air freight has been boosted since mid-2016 by the stronger economic and trade backdrop, bottlenecks in manufacturing supply chains, and a broader inventory restocking cycle.

Recent protectionist measures pose risks to global trade, but business surveys still point to solid annual FTK growth of around 5.6 percent in Q2 2018. Favorable supply and demand dynamics have continued to drive cargo yields upwards, and to offset some pressure from rising fuel costs. Meanwhile, daily freighter utilization rates have also continued to trend upwards into 2018.
Industry-wide FTKs grew by 7.4 percent year-on-year in the three months ended January a solid pace by historical standards but a slowdown from the double-digit annual rates seen in early to mid-2017.

Indeed, while FTKs trended upwards in seasonally adjusted (SA) terms into 2018, the latest quarterly growth rate was the slowest in almost two years. Annual growth in FTKs slowed on all of the major international market segments in Q4 2017, but remained solid in the region of 5-10 percent year-on-year.
The upturn in air freight demand in recent years has been supported by the stronger trade and economic backdrop, increasing bottlenecks in manufacturing supply chains, and a broader inventory restocking cycle. We expect economic momentum, particularly buoyant consumer confidence, to continue to support air freight demand in the near term.

The recent pick-up in protectionist trade measures poses obvious downside risks to global trade. Nonetheless, business surveys are consistent with solid annual FTK growth of around 5.6 percent in Q2 2018.
292 tonnes of additional cargo payload have been added to the freighter fleet so far in 2018 (gross). However, more than four times as much has been added in the form of belly-capacity via deliveries to the wide-body passenger fleet.

More favorable supply and demand dynamics have continued to drive cargo yields higher- yields rose by 16.2 percent year-on-year in January. This is helping to offset upward pressure on breakeven loads from higher fuel prices. Daily utilization rates of large freighter aircraft trended upwards into 2018, and remain at their highest level in more than five years.

Increased utilization will help to further reduce unit costs, and to reinforce cargo airline financial performance.
When surveyed in early-January, nearly two-thirds of airline Heads of cargo expected freight volumes to increase over the year ahead. ‘Our survey respondents also continued to expect further gains in yields over the period, IATA said.
Global business confidence has continued to trend upwards in recent months, and is currently at its highest level since August 2014. Economic activity in the so-called emerging markets improved strongly in late-2017.
The pick-up in air freight demand in recent years has coincided with a stronger global economic and trade backdrop: global goods trade grew by 4.6 percent year-on-year in Q4 2017 well above its five-year average pace (2.6 percent).
Consumer confidence remains buoyant, and is helping to support demand for air freighted goods. This has particularly been the case in major emerging markets, which ties in with reports of more balanced cargo flows on key trade lanes.
‘Air freight demand has also been boosted by the restocking cycle.

We estimate that the restocking cycle explains half of the outperformance of air freight growth relative to wider global goods trade growth in 2017.

IATA noted.

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