North American carriers en route for robust growth
2017 was undoubtedly a record-breaking year for the air cargo industry. After nearly six years of anaemic demand, resurgent global economic conditions coupled with increasing import and export orders, helped stoke the air freight industry to its best performance. The air cargo industry in North America, like any other part of the world, also witnessed a sharp rebound and is well on its way to make significant investments to bolster growth.
For North American carriers, freight demand grew 5.4 per cent year-on-year in December 2017 while capacity inched up 2.2 per cent. This contributed to an annual growth in 2017 of 7.9 per cent. Capacity grew by 1.6 per cent in the 2017 calendar year, IATA’s recently released data stated.
The strength of the US economy and the US dollar attributed to the increase in the inbound freight market in recent years. Looking towards 2018, the recently agreed US tax reform bill may help to support freight volumes in the period ahead although this may be offset by the recent weakening in the dollar, the industry body forecasted.
“It’s refreshing to see renewed demand for air cargo after several years of industry revenue decline. When I think about 2017 overall, I am reminded that the entire air freight industry revenue contracted 28 per cent between 2010 and 2016 while annual growth in cargo capacity grew 18 per cent between 2011 and 2016. This put a tremendous downward pressure on yields. It’s difficult for any business to make needed investment in products and services in that kind of operating environment, so 2017 and especially the December quarter was clearly a welcome change,” said Eric Wilson, managing director global sales cargo, Delta Cargo.
“Throughout 2017, we saw load factors, yields and revenue all improve. And while cargo is still a very tough and competitive business, the developments in the course of the year were certainly the most positive that we’ve seen in a very long time. Here at American, we reported that our growth outpaced the industry and our global team worked really hard to make that happen. In fact, we delivered improved operational performance at a time when volumes increased by over 15 percent,” revealed Lisa Oxentine, managing director, Global and Key Accounts – Cargo Sales, American Airlines.
Taking advantage of the changing global needs and with the improving revenue picture, North American carriers are looking at continued investment across the industry as customers demand improved service performance, increased visibility of information and better connectivity.
During the coming year, American is looking at expanding its network. “We already have 150 widebody aircraft operating 6,700 flights per day. We also recently announced some new seasonal routes to Europe for the summer of 2018 and three of them are new destinations, meaning we can bring our cargo products to an even wider market,” Oxentine said.
Starting in May, two eastern European capitals, Budapest, Hungary (BUD) and Prague, Czech Republic (PRG) will be served from Philadelphia (PHL) and Venice, Italy (VCE) will be served from Chicago (ORD) by American. Then, in June, service from DFW to the Icelandic capital Reykjavik (RKV) will commence.
In another development, American Airlines and Australian carrier Qantas Airways resubmitted an application to form a joint business on routes between North America, Australia and New Zealand with the US Department of Transportation. Under the proposed agreement, the airlines would greatly expand codeshare flights between the United States and the Australian continent. While the proposal highlights passenger service, according to the amended joint application that was originally filed in November 2017, the carriers would also work to expand cargo services under the codeshare agreement. Other areas of cooperation include sharing facilities and aligning the carriers’ IT systems to streamline operations.
For 2018, Delta aims to build on some of the foundational work it completed in 2017. “For example, we achieved CEIV certification at our headquarters and in our Atlanta hub, becoming the first US passenger carrier to earn this important distinction which is a pre-requisite to growing services like temperature-controlled pharmaceutical shipments. We are targeting more specialty and express services like DASH Critical which launched last year. This product has been well received in the domestic US market, where our customers appreciate the high-touch, white-glove service and GPS-enabled tracking. We are seeing good demand for this service and recently launched at our New York-JFK station,” said Delta’s Wilson.
This year Delta will inaugurate a new flight between Indianapolis and Paris. Indianapolis has long been a logistics crossroads and there are a number of promising industries located there, including pharmaceuticals and industrial manufacturing. “Trucking links are strong and we expect a robust catchment area to support these daily departures. In addition, we are putting more focus on the US west coast to Europe and launching daily flights from Los Angeles to both Amsterdam and Paris,” he added. This will be the first time for Delta to operate to both of its European hubs from Los Angeles, giving customers a new, nonstop direct flight.
“We are continuing our strategy to grow Seattle and will up-gauge our Seattle to Hong Kong daily flight to a B777. This will bring even more capacity to customers in the Pacific Northwest. Delta will operate 143 peak-day departures from Seattle in March 2018 and the bigger B777 aircraft will facilitate continued growth between Hong Kong and the Pacific Northwest,” he informed.
Meanwhile, United Airlines and All Nippon Airways recently entered into its next phase of the UA-ANA cargo joint venture, which is expected to add westbound transpacific routes to the eastbound transpacific phase of the venture, launched in July 2016. The UA-ANA cargo joint venture network includes weekly 360 nonstop flights to 15 destinations, and several flight and truck connections within the US and Canada. Customers shipping goods from the US or Canada to Japan will have access to more destinations, quicker transport times and “enhanced technology to create one-stop shopping for customers”, a United Cargo statement said. The benefits include access to more destinations with quicker transport times and enhanced technology to create one-stop shopping for customers.
Keeping up with the general trend, Air Canada too reported a robust 2017. Calin Rovinescu, the airline’s president and CEO, during a conference call with industry analysts and the public, stated the airline’s positive financial performance underscores the effectiveness of a strategy designed to equip Air Canada for sustainable profitability over the long term.
Rovinescu reported that the end of 2017 represented the fourth consecutive quarter of improved relative yield performance, “a very important trend for us given our capacity additions.”
Last year, Air Canada introduced 30 new routes. Half of them were new international city pairings including Toronto-Mumbai, Montreal-Shanghai and Vancouver-Melbourne.
Also, groundhandling major Worldwide Flight Services’ (WFS) North American operations began year 2018 with subsequent contract wins. At Houston’s George Bush Intercontinental Airport, WFS won the freighter handling contract for Turkish Airlines’ new twice-weekly flights to Istanbul. WFS also bagged new cargo handling contracts by Aer Lingus in Seattle for its new four times weekly flights to Dublin, starting in May. In Miami, Ethiopian Airlines has chosen to partner with WFS to support its new route from Addis Ababa. WFS expects to handle some 5,200 tonnes of freight per annum for the airline. DHL Air has also renewed contracts with WFS in both Kansas City and St. Louis. In Canada, WFS has also signed a three-year contract with Lufthansa to handle nearly 6,000 tonnes a year onboard its services from Frankfurt.
Meanwhile, airlines in Latin America reported growth of 5.8 percent in 2017, helped by the economic turnaround in Brazil. Carriers had a firecracker start in 2018 with the season of flowers gaining momentum.
More than two million fresh flowers per freight aircraft were shipped onboard LATAM Cargo during the four weeks leading to this Valentine’s Day holiday, which together with Mother’s Day (April and May) represent the peak seasons for fresh flower exports worldwide.
From January 17 to February 7, more than 163 freighters departed from Ecuador and Colombia, almost tripling the number of regular weekly shipments. Between Bogota and Miami alone, LATAM Cargo’s traffic rose to 2,670 tonnes, compared with an average traffic of 360 tonnes per week. The company’s Quito-Miami route was equally as busy, with 3,740 tonnes versus a weekly average of 450 tonnes. In total, LATAM Cargo carried more than 4,310 tonnes of fresh flowers from Colombia and over 5,220 tonnes from Ecuador.
“This holiday, we once again surpassed last year’s record peak. The figures are a testament to LATAM Cargo’s leadership in the region and reflects the trust customers have placed in our ‘perishable’ service, which ensures the highest standards during the entire shipping process so that products reach their final destination in perfect condition,” says Felipe Caballero, commercial vice president for Central and North America, LATAM Cargo.
The United States is the principal market for fresh flowers transported by LATAM Cargo. This Valentine’s Day, Miami International Airport received some 7,900 tonnes from LATAM, representing more than 80 per cent of its cargo shipments. Of the flowers entering the country, 89 per cent remained in Florida, while the other 11 per cent continued on, mainly to Los Angeles.
Despite recent years being some of the most troubled in the history of air cargo history, this demonstrated resilience among North American carriers coupled with the promise of steady economic growth reflects at a sustained trajectory of robust growth in the near future.