Current Issue

Global air freight has traditionally been used as an indicator of approaching growth or decline in the global economy. The fortunes of cargo airlines are intimately tied those of the economies they serve. From 2002 to 2007 the sector grew continuously, from 35 million freight tonne kilometres (FTKs) to 47 million. But in July 2008, two months prior to the collapse of Lehman Brothers, the International Air Transport Association (IATA) reported a “sharp dip” in growth, and by the end of that year, global FTKs were down compared to 2007. In December 2008 alone, cargo volumes slumped an unprecedented 23 per cent.

A recovery only began in 2010, but only by 2012 does IATA expect global freight to reach its pre-recession high. That forecast, however, may be revised as IATA subsequently reported that freight volumes had peaked in July 2010. Ominous to those fearing a double-dip recession, by mid-2011 the air freight market had contracted by six per cent from its post-recession high. That decline continued into September 2011, causing IATA to state: “The decline in air freight volumes in the past two months looks to be an early indication of a further decline in world trade and economic conditions.”

Regional route growth and contraction

While monthly data on global freight volumes is readily available, similar information about air cargo route growth and decline is more elusive. OAG provides the most useful data, though its figures exclude the operations of FedEx, UPS, DHL and TNT, which change their frequencies and routings too often to track effectively.

“There does seem to be a very simple correlation between new route development in cargo and the world economy,” says Tony Griffin SVP of ASM, which tracks passenger and cargo route development.

OAG data clearly shows the massive impact of the recession in the US on air cargo routes: from a high of 854 intra-North America cargo routes at the start of 2007, the market shed more than half in the next five years, with an astonishing 289 routes axed in 2010 alone.

Europe suffered less, gaining a net 13 routes from 2007 to 3Q 2011, although there were cuts as the financial crisis hit the world export market in 2008. Worryingly, in 2011 20 more routes have been cut than implemented – more even than in the dark days of 2008.

No wonder Ivor Llewellyn, cargo associate at ASM feels that “there’s not a great deal of growth at the moment”. He adds: “In terms of new routes it’s all been fairly flat, but the growth markets have been South America, maybe Central America and some of the African countries.”

If one examines new route creation, the data does not support Llewellyn’s point, as cargo connections from Europe and North America to Africa and South America have either stayed at 2007 levels or declined since then. The picture is very different, though, if one examines frequencies: in the last five years freight frequencies between Europe and South America have more than doubled, and those to Africa have risen by a quarter. Routes between Asia and Africa, meanwhile, rose from 37 to 50 in 2007, no doubt driven by China’s huge spending on the continent.

Asia-Pacific has also fared well, despite feeling some of the industry-wide blip in 2008. A net 24 intra-Asia cargo routes were lost that year, but the region now boasts 591 routes, up from 570 in 2007. Cargo frequencies increased by 10 per cent during the same period. The number of air freight connections to North America and Europe, though, has declined somewhat, perhaps reflecting a growing reliance on local rather than Western consumer demand.