Morten Beyer & Agnew www.mba.aero

Ups and Downs in the 2019 Air Cargo Market – Part I

Author: Anna Kopinski

Published: August 26, 2019

Brief:

In this edition of Morten Beyer & Agnew’s Insight Series, Anna Kopinski, mba’s Senior Associate of Asset

Valuations, analyzes how the cargo market has fared in 2019, what aircraft are being used the most—and

least—and how different metrics reveal divergent views on the state of the market. Later in this continuing

series, she will assess the external factors which may influence the air cargo industry, such as US-China

trade tensions.

Key Concepts:

The air cargo market’s growth surge between 2017 and 2018 has started to wane.

Quarterly fluctuations in global air cargo tonnage conceal the broad trends facing the industry.

Claims that a deep decline in air freight traffic is imminent are not supported by the data.

A cursory read of the press would have us believe that the air cargo market

has been in flux with a deep downward trend this year. Headlines have been

shouting that the market is “faltering”, “sliding”, “declining”, and “flat-lining.”

And indeed, the numbers look scary: compared to a peak in mid-2017, the

growth rates have been trending downward:

Source: CargoFacts, 2017-20191

However, the reality is that 2017 and 2018 had unprecedented levels of

growth in the market. When we take a closer look at those numbers, we

begin to see that while growth has slowed and begun lagging, it has not

really begun to decline in any appreciable fashion.

In fact, according to OAG, while 1Q19 saw a rather noteworthy dip in total

freight tons, the second and third quarters have seen more total freight tons

than ever measured before, with nearly 8 million tons more freight flown

year to date this year compared to the same time period in 2018.

1 The fundamental measure of air freight traffic is the Freight-Tonne Kilometer, which measures metric tonnes of revenue load, carried one kilometer. The sum of FTKs for every segment flown by every aircraft over a specific period is the FTK of an airline over that period.

-10.00%

-5.00%

0.00%

5.00%

10.00%

Jul-

17

Au

g-1

7

Sep

-17

Oct

-17

No

v-1

7

Dec

-17

Jan

-18

Feb

-18

Mar

-18

Ap

r-1

8

May

-18

Jun

-18

Jul-

18

Au

g-1

8

Sep

-18

Oct

-18

No

v-1

8

Dec

-18

Jan

-19

Feb

-19

Mar

-19

Ap

r-1

9

May

-19

Jun

-19

Total Market FTKYear-over-Year Growth

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While it is impossible to encapsulate all trends by all carriers, we wanted to examine how the largers air

freight operators were faring quarter over quarter, 2018 vs. 2019. As a cyclical industry, this provides a

snapshot of market health. While the largest carrier, Emirates, saw declines in the second quarter of 2019,

many carriers saw significant growth in 2Q19, both year over year and compared to the previous quarter.

Looking at the dedicated air freight carriers, while there may not be growth, there is no great decline,

either.

Source: OAG Analyser, August 2019

-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

Emirates United Airlines Delta Air Lines Garuda Indonesia China Southern Airlines

Largest Cargo Carriers by Tons

2018 Q1 2018 Q1 2019 Q1 2019 Q2

.0

100,000.0

200,000.0

300,000.0

400,000.0

500,000.0

600,000.0

700,000.0

800,000.0

Cathay Pacific Airways Cargolux AirlinesInternational

Qatar Airways AirBridgeCargo Korean Air

Dedicated Freight Carriers YoY

2018 Q1 2018 Q2 2019 Q1 2019 Q2

Finally, it is instructive to look at total freight tons carried by all air carriers over the quarters. Though the

numbers fluctuate, the trend remains clearly growing.

Source: OAG Analyser, August 2019

In short, as tempting as it is to see this as the beginning of a deep decline in air freight traffic, the data

does not substantiate such a negative outlook. Time will tell whether this is the market reaching critical

mass, a market correction, or simply a plateau.

Over the last few years, operators have taken aging passenger 737s, 767s, and 757s and converted them

to freighters. In Part II of this series, we will investigate the equipment being utilized in the air cargo sector

and how changes to fleet optimization methods impacts market capacity and growth.

In Part III, we will revisit mba’s earlier position that a major hurdle for the freighter market would be the

after-effect of trade tensions experienced between the U.S. and China in 2H 2018 and 1H 2019, which

could severely derail the upward growth track that the market has enjoyed since 2014.

Finally in Part IV, we will take a look back at all of the 2019 air cargo market, and try to ascertain whether

delaying tariffs until after the holiday season had any meaningful effect on air freight traffic.

75,000,000.0

80,000,000.0

85,000,000.0

90,000,000.0

95,000,000.0

100,000,000.0

105,000,000.0

1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19

Total Air Freight Carried

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