The air cargo industry continues on a ’rollercoaster ride’ of peaks and troughs, driven by the ongoing volatility of the global economy but freight and mail volumes at North America’s airports have shown a high level of resilience compared to other major international markets.
In its review of 2014, Airports Council International (ACI) says the higher growth in North America coincides with an American rebound. Lower unemployment and inflation containment coupled with a stronger international trade sector has created ingredients for favorable growth, the Council reported.
Commenting on the 12 month period for North America’s airports, ACI stated: “For a mature market, growth of 3.5% in airfreight volumes represents a banner year.” This growth was led by Chicago O’Hare, which saw its volumes grow 11.4% in 2014.
ACI World’s Economics Director, Rafael Echevarne commented: “In previous years we saw a marked divergence in growth between airports located in emerging markets versus those that are located in advanced economies. That is, the mature markets of North America and Europe experienced modest growth levels whereas the major emerging economies such as BRICS (Brazil, Russia, India, China and South Africa) had posted double-digit gains year-after-year. The recent cyclical slowdown in emerging markets has translated into lower growth levels with respect to both passenger and air freight traffic. However, the advanced economies of Europe and North America have rebounded in 2014, which resulted in a form of convergence in growth rates across the regions.”
In 2015, the fragility of international trade as companies and consumers cut back on their spending is continuing to stifle growth across the air cargo industry. In March, Chicago O’Hare saw freight and mail traffic rise 32.5% to nearly 184,000 tonnes, while Los Angeles’ volume in the month was over 15% higher at 178,000 tonnes. In its latest figures for May 2015, however, IATA Cargo reports that North American airlines reported a fall in demand of 2.9% year-on-year while capacity was cut by 4.2% but it does offer hope, stating: “Stronger growth, however, is expected in coming months.”
Total airfreight growth in May, according to ACI, dipped to a one-year low of 1.3%. Out of the top 30 airports by airfreight traffic, 15 posted a decrease in total freight volumes from the previous year. For North America, statistics show a modest growth of 1.1% in total freight and now attention is shifting towards hopes of a strong end-of-year ‘peak season’ to provide the welcome boost everyone needs.
Consolidated Aviation Services (CAS), which handles cargo at 46 facilities in North America, describes the market as a mixed picture but remains positive for the prospects of airfreight growth.
It is seeing improvements in volumes with many airline customers at its North American operations and a noticeable increase in the use of freighters. 2014 was also a record year for CAS in terms of the number of all-cargo charters it handled, with particularly strong growth at airports such as Indianapolis, Kansas City and Houston.
JFK has been a battleground not just for carriers, but also for cargo handlers, with Menzies pulling out of the New York cargo market over two years ago and Swissport withdrawing last July. It remains a very competitive market and a tough place to make the level of return needed to maintain the continued levels of required funding. The airport is in need of new investment in modern cargo facilities but while margins are so low, its infrastructure will continue to lag behind the first class facilities seen in other locations such as Dallas/Forth Worth.
One bright prospect is the Port Authority of New York and New Jersey’s decision to create a 100,000 sq ft cargo handling facility on the site of the old cargo building 78 as well as a new animal reception center.
CAS has signed a letter of intent to take that cargo handling building and to run the animal reception center. It is a firm believer that when an airport landlord starts building modern facilities, there are people willing to pay the new market rate to try and give an improved product and to take advantages of the business efficiencies modern day freight and logistics centers offer.
An ongoing challenge for cargo handlers across the U.S. is the “living wage ordinance” rules, which has significantly increased the cost bases of operators.
Unlike other global markets, in the U.S. airlines are charged a rate per kilo instead of against a terminal handling tariff. It has created a different dynamic to other international handling markets and has meant handlers having to go back to airline customers needing to negotiate rate increases to cover changes such as the living wage ordinance. Fortunately, many customers recognise the value of partnership and quality, and understand that their partners need to achieve a certain level of return if they are going to invest and generate innovation.
Generally, the wages and conditions of U.S. cargo handlers are all very similar but CAS is working hard to keep attrition rates low by providing better training and benefits to its team across North America, recognizing the advantages to customers of a sustainable workforce.
CAS’ takeover of IAS in 2013 represented another significant development in the North American handling market because of CAS’ willingness to invest in innovation and “working smarter”. It has been recognized as a “breath of fresh air” in a market where, since 2008, many cargo handlers have been simply focused on survival. The merger also brought CAS’ cargo operating system to the IAS business, which had been less of a cargo specialist but which had a presence at a large number of airports through its ramp and passenger handling activities, taking the group’s network to 46 airports.
The new CAS organization is full of ambition. It is focused on being in all of the locations where its customers want CAS to be. One of these regions is South America, where CAS’ presence was boosted by its successful bid to handle AF-KLM in Ecuador. It is also working to grow its passenger handling footprint and continuing to innovate with investment, such as in its own in-house handling system ‘Epic’.
It is also not ruling out future acquisitions.
Reno and Rickenbacker chosen as Amerijet domestic freighter hubs
One of its most noteworthy events in 2014 saw the launch in July of Amerijet’s nationwide U.S. scheduled freighter network, using Rickenbacker and Reno airports as domestic hubs. The Florida-headquartered cargo airline and multimodal forwarding and logistics group launched daily B767 freighter operations to and from its new Ohio and Nevada hubs, connecting 11 U.S. cities with long-haul domestic and intercontinental airfreight services.
Amerijet says the network provides a one- to two-day connection between Seattle, San Francisco, Los Angeles, Phoenix and Reno on the west coast and Columbus, Chicago, Detroit, Philadelphia, Newark and Atlanta on the east coast, also connecting to Amerijet’s international hub in Miami. It aims to fill a gap once served by companies such as BAX, Kitty Hawk, Emery and other carriers that did not survive the economic turmoil of the last decade, targeting shipments moving on lanes over 2,000 km, especially time-critical and high-value, temperature-controlled or hazardous material shipments.
Although secondary cargo airports have had a tough time since 2008, in part because weak volumes have put less pressure on metropolitan airport capacity, CAS believes they continue to offer important untapped potential given their ability to offer lower costs and less congestion.
Whatever the future for handling across North America, one thing is certain; CAS is there for the long-term and refusing to accept the status quo.