AIR FREIGHT MARKET INTELLIGENCE CORPORATE AIR FREIGHT, BASEL, SEP - - PowerPoint PPT Presentation

AIR FREIGHT MARKET INTELLIGENCE

CORPORATE AIR FREIGHT, BASEL, SEP 2018

MANAGEMENT SUMMARY

• As per Seabury, global air freight grew 4.9% y-o-y in July resulting in YTD growth of 6.4%. Market

consensus is at 4-5%

• Strong growth out of Cambodia, Thailand & Vietnam reflecting the impact of trade tariffs
• Certain commodities transported by Air Freight ex China/US are impacted by recent introduction of

additional trade tariffs. This might shift sourcing/manufacturing or integration of components to new locations (Vietnam, Malaysia, Indonesia, Mexico…):  On Sep 24, 2018 2nd round of trade tariffs by US & CN went into effect impacting 940 K tons of annual air freight flown between the two countries (equivalent to ~50%) – mainly machinery parts, high-tech, automotive parts and perishables. Transpacific volumes are most exposed to the trade tariffs, with 86% and 49% of air volumes on westbound and eastbound tradelanes affected, respectively  Airlines impacted on these lanes expected to compensate losses with rate increases on other constrained lanes as well

• Oil prices expected to remain high with Iran sanctions in place and US oil rigs slowing down the production
• Market slowdown not reflected in rates with airline market yields continue to be 15-20% higher compared to

2017

Source: IATA, Seabury, WorldACD, Panalpina Analysis

Based on current market situation and intelligence, corporate Air Freight anticipates continued higher rates - even if growth in certain markets slows down - and expects peak season similar to 2017

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GLOBAL AIR FREIGHT MARKET – OUTLOOK 2018

Corporate Air Freight, Internal Analysis (July 2018)

Our forecast of a first half year 2018 with continued capacity pressure and high buying rates was correct. We do foresee a continuation of this trend with a strong peak season 2018/19. Buying rates…

• from Asia increased by +15-25% as of April 1st for summer timetable. Rate increases for Oct-Dec will be between USD

0.50 and 2.50 depending on trade lane.

• from Europe increased by +15% as of April 1st for summer timetable. For winter timetable valid as of November 1st we

expect another increase of +10% on FEEB and +15% on TAWB/SAWB.

• from US increased by +10% due to increasing exports as of April 1st. As of November 1st we expect stable rates to

Latam, +10% to Asia and Europe (TAEB, TPWB). Capacity…

• …will remain scarce especially on key airport pairs. Few freighters are deployed in 2018 and are going to Integrators.
• …is king: e-commerce consolidators and Perishables shippers are taking a high share
• …is going to highest bidders. Some airlines introduce reverse capacity bidding.

What does that mean for clients?

• “You get what you pay for”: low rates will not guarantee capacity access in the next 6-12 months
• Shippers should focus on safeguarding capacity with clear lane specific back-to-back agreements
• Proper tonnage forecast is of utmost importance – large tonnage swings will not be manageable
• Building open, honest long-term partnership is of utmost importance

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STRONG PEAK SEASON EXPECTED

We do expect a strong peak season comparable to last year 2017 – hence we need a perfect preparation & execution!

Continued strong Air Freight demand Better capacity control by Airlines Higher buying rates

• Airlines control capacity especially on

key trunk lanes through alliances and increased cross- shareholding activities (e.g. Emirates-Cargolux, Qatar-Cathay)

• We continue seeing a less aggressive

approach by the MEST airlines

• Key infrastructure/airports such as AMS,

FRA, HKG and PVG are full and new airports (LGG, BRU, CGO) slowly developing

• The 2017 peak seasons ex Asia & Europe

were the strongest we have experienced in

• years. We do expect a similar peak season

in Q4’18 – Q1’19.

• Global AF growth ’17 was +10%; YTD ‘18

we experience another 4-5% growth leading to very tight capacity situations. The global economy continues to be positive driving air cargo demand from US, Asia and Europe; tightest market remains Brazil.

• Cross-border e-commerce- as well as

Perishables shippers block significant capacity

• Our procurement cost have increased as of April 1st 2018 – another

increase is clear for the winter timetable ‘18/’19.

• The average price of jet fuel has significantly increased

compared to 12 months ago leading to higher costs for airlines.

GLOBAL MARKET TRENDS 2018

Worldwide air freight market grew by 4.9% y-o-y in July. YTD July growth stands at 6.4%

Source: Seabury

Strong growth out of Cambodia, Thailand & Vietnam reflecting the impact of trade tariffs

Tight and volatile capacity into Brazil Very tight into JNB Tight and volatile from EU to PVG Very tight into and ex India & Bangladesh Tight and volatile capacity into Mexico

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GLOBAL INDUSTRY TRENDS 2018

Consumer goods and Fashion goods continue to see decline while Machinery Parts having the strongest absolute growth

Source: Seabury 6

DISCLAIMER

AF MARKET INTELLIGENCE | CORP AF | 18 SEP 2018 |

Panalpina Management Ltd. quotes from a number of public and paid sources that, to the best of our knowledge, are true and correct. It is our intent to present only accurate information. However, in the event any information contained herein is erroneous, Panalpina Management Ltd. will accept no liability or responsibility.

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