My Account Menu

CAPA Login


Register to trial CAPA Membership!

Chinese airlines report decline in cargo volumes in May-2011

24-Jun-2011

The spectacular rebound in China’s airfreight demand of 2009 and 2010 has slowed notably in 2011. Chinese mainland airlines reported year-on-year declines in cargo volumes in May-2011, marking the second month of year-on-year reductions so far this year. The two reductions in 2011 follow a period of continuous cargo growth that commenced in Jun-2009, as the country’s manufacturing sector recovered at a cracking pace after the global financial downturn.

However, CAAC still anticipates cargo to increase at a double-digit pace over the next five years, despite the current weakness. According to CAAC’s recently published 12th Five Year Plan (2011-15), cargo volume is expected to increase by 10% p/a from 5.6 million tonnes in 2010 to 9.0 million tonnes in 2015. Passenger traffic is projected to grow during this period at an average of 11% to reach 450 million passengers in 2015, up from 268 million in 2010. Passenger load factors are expected to be greater than 70% in 2015. Load factors averaged 71.6% in 2010.

China domestic and international freight year-on-year freight growth: Jan-2010 to May-2011

Cargo volumes decline 4.2% in May-2011

Cargo volumes declined 4.2% year-on-year to 447,4000 tonnes in May-2011, following growth of 36% in May-2010. Cargo volumes also declined in Feb-2011 due to reduced demand over the Chinese Lunar New Year. In May-2011, domestic cargo volumes increase slightly, by 2.2 % to 308,700 tonnes with regional cargo volumes declining 3.5%.

CAAC passenger numbers growth vs cargo volume growth: Jan-2009 to May-2011

However, the standout was the 16% slump in international freight to 138,700 tonnes, according to CAAC. International freight growth has been limited to either single-digit growth or contractions in 2011, after strong double-digit growth rates throughout 2010. 

CAAC reported the following traffic highlights in May-2011:

  • Passenger numbers: 24.1 million, +11.8% year-on-year;
    • Domestic: 22.5 million, +12.6%;
    • Hong Kong, Macau and Taiwan: +18.7%;
    • International: 1.6 million, +1.3%;
    • Passenger load factor: 81.3%, +4.3 ppts;
    • Cargo volume: 447,400 tonnes, -4.2%;
      • Domestic: 308,700 tonnes, +2.2%;
      • Hong Kong, Macau and Taiwan: -3.5%;
      • International: 138,700 tonnes, -16.0%.

The Japanese earthquake and tsunami disaster continued to have a negative impact on trade between China and Japan in May-2011 with cargo volume on the route weakening 17.3% year-on-year in the month. Cargo volumes between China and South Korea slumped 44.3%.

China Eastern reports double-digit cargo reduction in May-2011

China Eastern Airlines, the country's largest cargo operator and second largest carrier by passenger numbers, handled 108,360 tons of cargo in May-2011, a 12.7% year-on-year reduction, Hainan Airlines also reported a freight volume reduction of 3% to 23,428 tonnes. China Southern Airlines and Air China both reported single-digit cargo growth – China Southern cargo volume increased 2.3% to 92,100 and Air China reported a 1.3% increase to 98,490 tonnes. 

China Southern Airlines, China Eastern Airlines, Air China and Hainan Airlines traffic highlights for May-2011

 

China Southern

% change

China Eastern

% change

Air China

% change

Hainan Airlines

% change

Passenger numbers (mill)

6.6

+9.8%

5.8

+12.2%

4.1

+7.1%

1.6

+4.4%

Domestic (mill)

6.0

+9.2%

5.0

+13.4%

3.5

+8.2%

n/a

n/a

International

489,800

+16.7%

528,520

+6.0%

512,900

-1.4%

n/a

n/a

Regional

146,360

+14.8%

226,250

+1.5%

145,100

+14.7%

n/a

n/a

Passenger load factor

80%

+4.9ppts

78.3%

+3.6ppts

81.8%

+3.6ppts

84.4%

+5.4ppts

Domestic

82.1%

+6.8ppts

80.3%

+3.5ppts

82.5%

+5.0ppts

n/a

n/a

International

71.6%

-2.1ppts

74%

+4.6ppts

81%

+1.0ppt

n/a

n/a

Regional

76.9%

+1.6ppts

70.2%

-1.8ppts

79.3%

+5.3ppts

n/a

n/a

Cargo volume (tonnes)

92,100

+2.3%

108,360

-12.7%

98,490

+1.3%

23,428

-3.0%

Domestic

71,050

+2.3%

55,520

-7.13%

53,981

+4.9%

n/a

n/a

International

19,970

+16.8%

42,700

-21.64%

40,357

-0.9%

n/a

n/a

Regional

1,070

-3.2%

10,150

3.17%

4151

-18.4%

n/a

n/a

Cargo load factor (%)

n/a

n/a

60.6%

-1.2ppts

60.4

-1.4ppts

n/a

n/a

Domestic

n/a

n/a

43.1%

-3.2ppts

45.1%

-0.6ppts

n/a

n/a

International

n/a

n/a

71.2%

+2.3ppts

72.5%

-1.6ppts

n/a

n/a

Double-digit passenger growth

Passenger numbers, meanwhile, continued their growth trajectory, with total passenger numbers increasing 11.8% to 24.1 million in May-2011 according to CAAC. Passenger numbers have increased by double-digits in both May-2011 and Apr-2011 after slowing to single-digit growth in Mar-2011. In Mar-2011, domestic traffic increased by 5.2%, the slowest pace of growth since Sep-2008. Domestic traffic grew by 15% in 2010 and 22% in 2009.

In May-2011, domestic passenger, representing 93% of the total, increased 12.6% to 22.5 million. International traffic growth was weaker, strengthening 1.3% to 1.6 million. Regional (Hong Kong, Macau and Taiwan) traffic increased 18.7%. Load factors averaged 81.3% marking a 4.3 ppt improvement. Passenger traffic on the China-Japan sector fell 28% year-on-year and was down 1.0% when compared with Apr-2011 results.

CAAC domestic passenger growth vs international passenger growth: Jan-2009 to May-2011

Passenger load factors averaging 78-85%

All four carriers Chinese reported passenger traffic growth in the month, across all regions. Passenger load factors also improved at all four carriers, with average load factors ranging from 78% to 84.5%. Cargo load factors, as reported by China Eastern and Air China, declined slightly to around 60.5%.

Cathay Pacific sees sluggishness in cargo market; to run through summer

Cathay Pacific also reported weakness in freight markets in May-2011. "In May, the market remained quiet and well below the strong May 2010 result when restocking of inventories remained in full swing," said James Woodrow, general manager of Cathay Pacific Cargo Sales & Marketing said. "Europe was particularly weak and Cathay Pacific reduced Europe capacity to better match the lower demand," he added.

In the Jun-2011 issue of staff magazine, CX World, Mr Woodrow said the sluggishness that appeared in the cargo market in Apr-2011 and continued in May-2011 "look set to run through into summer". He added that despite both tonnage and revenue showing a year-on-year decline, "there's no sign of any structural change in demand". The carrier also noted that in addition to a drop in exports out of Hong Kong, it has seen a "significant softening in exports from China and in particular from Shanghai". However, imports have been "holding up well, with some adjustment in the usual directional imbalance, and demand on intra-Asia routes has also been strong". The carrier also stated it has been making ad hoc cancellations in line with demand.

Mr Woodrow concluded: "Comparisons with last year are skewed because 2010 really was exceptional, with consistently strong demand as the economy bounced back from recession. We have to remember that the period April through June is traditionally a slacker period, so in some sense what we are seeking now is a return to normal market conditions."

See related article: Cathay Pacific sees weakness in some passenger markets, strength in others. Freight slumps

AAPA notes decline in Asia freight; IATA also notes downward drift

Similarly, AAPA noted a 2.4% decline in international air cargo traffic at Asian airlines in May-2011, reflecting some moderation of global economic growth, affecting Asian exports, especially when compared to the very strong rebound in demand witnessed in 2010. AAPA, however, anticipates a pickup in volume in the traditionally stronger second half. 

IATA in its 12011 Cargo E-Chartbook, also noted a deterioration in the market environment, stating shocks have hit the demand side in Japan and MENA and the cost side with a further surge of fuel prices. The dramatic expansion in airfreight volumes seen in 2009 and early 2010, ground to a halt in 2Q2010, with a downward trend since.  Freight levels, however, remain above pre-recession levels.

Air Freight Carried by freighter or Belly Hold (Airline Sample)

IATA forecast that cargo markets and cargo profitability will be squeezed further but should be able to stay in profit this year. Profit margins have been coming under downward pressure since 3Q2010. 

However, IATA forecast continued growth for China, which is forecast to the be the second fastest growing international freight market over the 2009 to 2014 period with growth of 11.7%, behind Hong Kong (+12.3%) and ahead of Vietnam (11.4%), Chinese Taipei (11.3%) and the Russian Federation (11.0%). The volume growth expected in China and Hong Kong will account for a third of global volume growth over the period to 2014. By 2014, IATA expects China to be the fifth largest international freight markets, behind the US (8.8 million tonnes), Hong Kong (5.4 million tonnes), Germany (4.4 million tonnes) and Japan (4.4 million tonnes).


Want more analysis like this? CAPA Membership gives you access to all news and analysis on the site, along with access to many areas of our comprehensive databases and toolsets.
Find out more and take a free trial.