Feb 10, 2020
The cargo freight market is likely to remain weak this year, industry leaders believe, as it remains hampered by overcapacity and weak growth in several regions around the world.
“We see 2020 not improving significantly… There will be some capacity coming out of the market, so there is some balance coming, but the price pressure will continue,” Cargolux finance chief Maxim Straus said at the Airline Economics Growth Frontiers conference in Dublin.
“There are lots of areas of the world that are shaky,” he added, noting weakness in South America and Hong Kong.
The Luxembourg-based airline will still announce a profit for 2019 and intends to keep its capacity roughly steady through 2020. It expects freight growth to return in 2021.
Ed McGarvey, treasurer of Atlas Air Worldwide, notes that “2019 was a challenge”, citing “Trump, trade and tariffs”. The airline has previously announced that its 2019 earnings would be 60-65% of the level in 2018.
“Our expectations for 2020 is the market is soft… The first half of the year will continue to be soft. The back half of the year should pick up,” said McGarvey.
While the general freight market faces difficulties, the “Amazon effect” of growth in e-commerce presents an opportunity of which Atlas is looking to take advantage. Still, a sign of the market’s overall weakness is that Atlas is examining whether to temporarily park part of its fleet.
McGarvey said the concerns over recent years that the belly space in the Boeing 787 and Airbus A350 might take business away from dedicated freighters have not, however, come to pass. “Passenger aircraft do not fly at the right times,” he said, arguing that dedicated freighters are able to supply the flexibility that cargo customers require.
“They move at different times, they move in different patterns.”
Brexit is unlikely to have a substantial short-term impact on the market, in the view of participants. Straus commented that the UK accounts for around 6% of Cargolux’s volumes. He believes there will be no impact during the transitional period that runs from January 31 to the end of 2021 – or even a pick-up in the charter trade.
Thereafter, however, an EU-UK air services deal is required, which “could be an impact on the tonnage”. There is also the potential for customs changes to affect operations over the long-term, he notes.