AIR FREIGHT MARKET INTELLIGENCE CORPORATE AIR FREIGHT, BASEL, SEP 2018
MANAGEMENT SUMMARY • As per Seabury, global air freight grew 4.9% y-o-y in July resulting in YTD growth of 6.4%. Market consensus is at 4-5% • Strong growth out of Cambodia, Thailand & Vietnam reflecting the impact of trade tariffs • Certain commodities transported by Air Freight ex China/US are impacted by recent introduction of additional trade tariffs. This might shift sourcing/manufacturing or integration of components to new locations (Vietnam, Malaysia, Indonesia, Mexico…): On Sep 24, 2018 2 nd round of trade tariffs by US & CN went into effect impacting 940 K tons of annual air freight flown between the two countries (equivalent to ~50%) – mainly machinery parts, high-tech, automotive parts and perishables. Transpacific volumes are most exposed to the trade tariffs, with 86% and 49% of air volumes on westbound and eastbound tradelanes affected, respectively Airlines impacted on these lanes expected to compensate losses with rate increases on other constrained lanes as well • Oil prices expected to remain high with Iran sanctions in place and US oil rigs slowing down the production • Market slowdown not reflected in rates with airline market yields continue to be 15-20% higher compared to 2017 Based on current market situation and intelligence, corporate Air Freight anticipates continued higher rates - even if growth in certain markets slows down - and expects peak season similar to 2017 Source: IATA, Seabury, WorldACD, Panalpina Analysis 2
GLOBAL AIR FREIGHT MARKET – OUTLOOK 2018 Our forecast of a first half year 2018 with continued capacity pressure and high buying rates was correct. We do foresee a continuation of this trend with a strong peak season 2018/19. Buying rates… from Asia increased by +15-25% as of April 1 st for summer timetable. Rate increases for Oct-Dec will be between USD • 0.50 and 2.50 depending on trade lane. from Europe increased by +15% as of April 1 st for summer timetable. For winter timetable valid as of November 1 st we • expect another increase of +10% on FEEB and +15% on TAWB/SAWB. from US increased by +10% due to increasing exports as of April 1st. As of November 1 st we expect stable rates to • Latam, +10% to Asia and Europe (TAEB, TPWB). Capacity… • …will remain scarce especially on key airport pairs. Few freighters are deployed in 2018 and are going to Integrators. • …is king: e-commerce consolidators and Perishables shippers are taking a high share • …is going to highest bidders. Some airlines introduce reverse capacity bidding. What does that mean for clients? • “You get what you pay for”: low rates will not guarantee capacity access in the next 6-12 months • Shippers should focus on safeguarding capacity with clear lane specific back-to-back agreements • Proper tonnage forecast is of utmost importance – large tonnage swings will not be manageable • Building open, honest long-term partnership is of utmost importance Corporate Air Freight, Internal Analysis (July 2018) 3
STRONG PEAK SEASON EXPECTED We do expect a strong peak season comparable to last year 2017 – hence we need a perfect preparation & execution! Airlines control capacity especially on The 2017 peak seasons ex Asia & Europe key trunk lanes through alliances and increased cross- shareholding activities were the strongest we have experienced in Continued (e.g. Emirates-Cargolux, Qatar-Cathay) years. We do expect a similar peak season strong Air We continue seeing a less aggressive in Q4’18 – Q1’19 . Freight demand Global AF growth ’17 was +10%; YTD ‘18 approach by the MEST airlines Key infrastructure/airports such as AMS, we experience another 4-5% growth leading Better capacity FRA, HKG and PVG are full and new to very tight capacity situations . The control by airports (LGG, BRU, CGO) slowly global economy continues to be positive Airlines developing driving air cargo demand from US, Asia and Higher Europe; tightest market remains Brazil. buying Cross-border e-commerce- as well as rates Our procurement cost have increased as of April 1 st 2018 – another Perishables shippers block significant increase is clear for the winter timetable ‘18/’19 . capacity The average price of jet fuel has significantly increased compared to 12 months ago leading to higher costs for airlines.
GLOBAL MARKET TRENDS 2018 Worldwide air freight market grew by 4.9% y-o-y in July. YTD July growth stands at 6.4% Very tight into and ex India & Bangladesh Tight and volatile from EU to PVG Tight and volatile capacity into Mexico Tight and volatile capacity into Brazil Very tight into JNB Strong growth out of Cambodia, Thailand & Vietnam reflecting the impact of trade tariffs Source: Seabury 5
GLOBAL INDUSTRY TRENDS 2018 Consumer goods and Fashion goods continue to see decline while Machinery Parts having the strongest absolute growth Source: Seabury 6
DISCLAIMER Panalpina Management Ltd. quotes from a number of public and paid sources that, to the best of our knowledge, are true and correct. It is our intent to present only accurate information. However, in the event any information contained herein is erroneous, Panalpina Management Ltd. will accept no liability or responsibility. AF MARKET INTELLIGENCE | CORP AF | 18 SEP 2018 | 7
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