Air cargo missing out on China boom
The air cargo industry is showing few signs of a major recovery despite the economic upturn and the increased exports from the Asia Pacific market. A number of key air cargo carriers have released their financial results for 2003-4 which indicate rising volumes but also falling yields.
In the last year British Airways’ cargo operations saw a 4.3% decline in revenues to £463m (€675m) from £484m (€706m). The number of revenue tonne kms performed by the carrier (the usual indicator of output) increased by 3.9% against an increase in available tonne kms of just 2.5%. This resulted in higher load factors: 67.6% against 66.6% the year before. Cargo volumes for the full year (CTKs) were up 6.0% compared with last year, with yields down 9.7%. The company experienced an upturn in freight carried of 4.2% to 796,000 tonnes.
The world’s largest international carrier, Lufthansa Cargo, increased the amount of cargo it carried by 7.7% in its last quarter compared with the same period the year before, rising to 414,000 tonnes. Its load factor rose by 3.4 points to 68.9%. Despite this, losses increased to €13m from €3m and revenues fell to €510m from €519m mainly because its revenue per kilo of freight carried fell by 8.5%. This was as a consequence of tougher competition in the global air freight market.
Meanwhile, even though KLM Cargo had a strong last quarter its full-year profit remained flat at €71m compared with €72m in 2002/3. It too experienced the same market conditions as BA and Lufthansa: rising traffic but falling yields. Volumes rose 8% in the quarter, helped by extra capacity and a hike in shipments from Asia to Europe. However yields fell by 11% and as a result revenues fell by 6% to $310 million as. Full-year revenues fell by 6% to €1bn.
The results of the air cargo carriers are in stark contrast to the sharp rise in profitability in the shipping sector. Whereas shipping lines have struggled to bring on more supply to meet the rising demand, particularly in Asia Pacific, the air cargo market still seems to be over-supplied which has resulted in the falling yields. This is perhaps a result of one of the peculiarities of the air cargo market, where supply is more dependant on another market – passengers – than on the actual needs of its clients.
