Tuesday, April 24, 2012

Troubling times for the air freight forwarding market

The global air freight market continues to struggle as fuel prices increases while yields decline. In spite of this, deliveries of new belly-hold capacity are picking up – all combined, this will make for a difficult market with no relief in sight.

Strategies from top freight forwarders varies as Kuehne + Nagel, while acknowledging the difficult market, plans to grow at a faster rate than the market. The company is focusing its efforts to market its portfolio of high value-added airfreight. Panalpina also expects a difficult 2012 market and plans to focus on growth on five tradelanes: Asia-Europe, Asia-North America, Asia-Latin America, Asia-Middle East and Intra Asia.

However, it appears first quarter of 2012 may prove to be troubling for many air freight forwarders. In a somewhat surprising announcement, Expeditors International of Washington issued a press release stating the company expects its first quarter 2012 earnings to be less than what analysts have forecasted. According to chairman and CEO Peter Rose, "We've been saying for over six months now that things in the global economy just didn't seem to us to be as encouraging as a lot of the pundits were projecting. Our preliminary data seems to reveal a trend where existing customers, particularly airfreight customers, are shipping at lower volumes than we experienced during the 2011 first quarter. From our own perspective, as we proceed forward in 2012, we need to be even more aggressive in cost containment and more focused on both expanding our customer base and further extending our business reach with existing customers.”

Perhaps Apple’s March launch of its latest iPad will help the air freight market – particularly DHL, one of the largest freight forwarders. However, electronic shipments have been declining and the March figures may not help the overall slump noted in January and February.

The US airfreight market was not overly impressive for the first two months of the year – perhaps reflecting the overall global trends as well as difficult 2011 comparisons due to the timing of the Chinese New Year. However, import tonnage increased 6% thanks to African and European trade partners. Export tonnage noted declines but slight increases were noted in Europe and South/Central America. Of concern, declines were noted overall with South/Central America and Europe reporting the largest percentage declines for import (-27.7%) and export (-11.4%) respectively.

The Asian, European and South/Central American tradelanes may reflect the slowing of economic growth in these particular regions. Although the growth of the African tradelane is based on a smaller base, it is still a lane worth further monitoring. Countries such as South Africa and Morocco are reporting higher growth rates in trade and are in the top 25 countries of Transport Intelligence/Agility’s Emerging Markets Logistics Index.

US Air Imports (Jan-Feb)
US Air Exports (Jan-Feb)
Air Value: YoY change
Air Tonnage (KG): YoY change
Air Value: YoY change
Air Tonnage (KG): YoY change
South/Central America
Source: USA Trade Online