Airlines to manage capacity tightly to boost H2 peak season rates

PANALPINA registered five per cent year-on-year growth in first-half air cargo traffic to total 512,000 tonnes, on the back of acquisitions, however, its air revenues fell by 2

25 July 2019 - 19:00

PANALPINA registered five per cent year-on-year growth in first-half air cargo traffic to total 512,000 tonnes, on the back of acquisitions, however, its air revenues fell by 2.6 per cent to CHF1.5 billion (US$1.52 billion) and gross profit declined by 4.9 per cent to CHF337 million.

Commenting on estimates that the global air freight market will see a five per cent decrease in second quarter volumes after a first quarter decline of two per cent, Panalpina's global head of air freight Lucas Kuehner said in a company newsletter: 'The ongoing trade conflict between the US and China has clearly not helped the air freight market.

'We must also not forget that we are comparing against an exceptionally strong first half-year of 2018. A comparison with the first half-year of 2017 gives a more realistic picture. Compared to 2017, our unit profitability was better and EBIT stable. The difference is that in 2017 the market got stronger with every quarter and rates increased accordingly. The market in 2019 is heading the opposite direction.

'Volumes have been going down, especially in the automotive sector, which has shifted into reverse gear. Decreasing airfreight volumes translate into falling rates and this has put pressure on margins. In the current market environment, it is difficult to achieve last year's performance.'

Asked about air cargo's market sentiment for the 2019 peak season, Mr Kuehner was cited as saying in a report by London's Air Cargo News: 'Starting in October, there will be the usual peak season in air freight - if not as strong as last year or 2017, for sure. Carriers will try to manage their capacity more tightly in an attempt to lift rates.

'As in previous years, we are already in talks with our customers to assess their requirements and secure capacity. Should bottlenecks with commercial carriers become an issue, we can provide fast, agile and reliable solutions with our charter network' that deploys Boeing 747-8 freighters.

While air freight's automotive and technology sectors have been struggling most, Mr Kuehner singled out healthcare as having a positive trend, with new customers for the forwarder which will merge later this year with DSV of Denmark.

Mr Kuehner said: 'We have invested in our capabilities in this area [healthcare], which requires more specialisation than most other industries, and this is now starting to pay off. In the past months, we have not only retained several larger customers, but also won new ones.

'We are strong in good distribution practice, with new modern facilities in strategic locations and professionally trained staff across the globe that can handle pharmaceuticals.'

He said another area where the company sees 'continuous growth is the perishables sector.'

Responding to a question on mounting tensions in the Middle East, Mr Kuehner confirmed that some airlines have rerouted flights in the region, adding: 'So far this has not led to any noteworthy impact on cargo flows, but things could change quickly, of course, if the situation escalates.'

Commenting on the greater interdependence of air and ocean, Panalpina's air freight boss said that over the past decade it has become 'increasingly difficult' to predict the market development of global air or ocean freight.

He added that their high level of complexity, makes it hard to anticipate the final trade volumes and freight mix of its customers. This lack of visibility in predicting customer demand is due to the 'complicated political, regulatory and macroeconomic environment' for both transportation modes.


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