Evan Rosen
Air Freight Supply and Demand Dynamics
Evan Rosen Vice President of Sales RCS Logistics May 13, 2011
Topics of Discussion • Current International Air Freight Capacity • Air Freight Price Index • Fuel Costs and Surcharges • Hong Kong Air Freight • Air Freight Market and Forecast • US Retail Sales
Current International Air Freight Capacity vs Growth Statistics • Freight Traffic & Capacity Returning capacity is exceeding slowing the demand and in February international air freight demand slowed to 2.3 percent growth as capacity growth slowed to 7.9 percent over February 2010. The combined January‐ February industry demand growth of 5.5 percent was outpaced by the 9.5 percent year‐over‐year growth in capacity.
Monthly year‐over‐year percent change in total scheduled international freight traffic and capacity worldwide
Air Freight Price Index (Based on All Inclusive Rates)
Fuel Costs and Surcharges • Fuel Surcharges with the airline carriers are changing more often. Some on a weekly basis. • Hong Kong is the only origin that enforces a uniform FSC rate across the board for all carriers. • FSC is set by each airline individually for all other countries. • Often the Air Freight Forwarder takes the blame for the fluctuations of these charges. FSC is a pass through charge from the carriers. • Frequent FSC changes continue to make it difficult for importers to calculate landed costs.
Increasing Fuel Economic upswing has increased fuel prices but Middle East political issues has played a role in recent surge
Hong Kong Air Freight • Last year Hong Kong became the world’s busiest cargo airport, overtaking Memphis for the first time. • Hong Kong International Airport handled 369,000 tons of cargo in March 2011, an increase of 6.2 percent over March 2010. • Plans for airport expansion continue with Cathay resuming construction of new air cargo terminal. • Growth and partnership between HKIA and ORD as “sister gateways” further supports the trade between China and US. • Additional mainland China airports involved in a co‐sponsoring partnership with Hong Kong. Sources: Cargonews Asia and The A‐Z Publishing Group
Air Freight Market and Forecast • Volumes peaked in May 2010, at the close of the business inventory cycle as customers no longer needed rapid air shipment to restock. • The high growth rates of 20% and above in 2009 and early 2010 were driven by a sharp turnaround in business inventories. The need for air freight was high in demand to quickly restock depleted inventories with the economic recovery. • That cyclical boost to air freight ended in early 2010 as inventories returned to normal levels which were relative to sales. • Air freight industry may see reduction in volume to as the economic cycle shifts from just in time restocking (which benefits air) to ocean transportation as retailers can now better forecast inventory needs.
Upturn in global air traffic volumes in 2010 and January 2011 with additional growth expected in 2011 peak season for US Imports.
US Retail Sales • Overall retail sales in March of this year has increased across the board for the ninth straight month. The sale of commodities such as clothing, electronics, home furnishings and building materials are on the rise. • Economic growth forecasts have been revised higher in the past 3 months, despite the rise in commodity prices. • Factors related to March’s push in sales – Federal and State Tax returns – Warmer weather (home improvement , landscaping equipment and out door furnishings) – New spring attire Source: National Retail Federation
Inventory to Sales Ratio
Air Freight Overview Wrap Up • Forecast for Peak Season 2011 • Unpredictable Pricing Trend Continues • Post‐Recession Air Freight Rebound Over • Hong Kong Remains as #1 Air Freight Hub in Asia (and now) Globally. • Fluctuating and High Fuel Costs Remain an Issue • US Retail Sales Remain Steady • Q and A
Evan Rosen Vice President of Sales RCS Logistics May 13, 2011
Topics of Discussion • Current International Air Freight Capacity • Air Freight Price Index • Fuel Costs and Surcharges • Hong Kong Air Freight • Air Freight Market and Forecast • US Retail Sales
Current International Air Freight Capacity vs Growth Statistics • Freight Traffic & Capacity Returning capacity is exceeding slowing the demand and in February international air freight demand slowed to 2.3 percent growth as capacity growth slowed to 7.9 percent over February 2010. The combined January‐ February industry demand growth of 5.5 percent was outpaced by the 9.5 percent year‐over‐year growth in capacity.
Monthly year‐over‐year percent change in total scheduled international freight traffic and capacity worldwide
Air Freight Price Index (Based on All Inclusive Rates)
Fuel Costs and Surcharges • Fuel Surcharges with the airline carriers are changing more often. Some on a weekly basis. • Hong Kong is the only origin that enforces a uniform FSC rate across the board for all carriers. • FSC is set by each airline individually for all other countries. • Often the Air Freight Forwarder takes the blame for the fluctuations of these charges. FSC is a pass through charge from the carriers. • Frequent FSC changes continue to make it difficult for importers to calculate landed costs.
Increasing Fuel Economic upswing has increased fuel prices but Middle East political issues has played a role in recent surge
Hong Kong Air Freight • Last year Hong Kong became the world’s busiest cargo airport, overtaking Memphis for the first time. • Hong Kong International Airport handled 369,000 tons of cargo in March 2011, an increase of 6.2 percent over March 2010. • Plans for airport expansion continue with Cathay resuming construction of new air cargo terminal. • Growth and partnership between HKIA and ORD as “sister gateways” further supports the trade between China and US. • Additional mainland China airports involved in a co‐sponsoring partnership with Hong Kong. Sources: Cargonews Asia and The A‐Z Publishing Group
Air Freight Market and Forecast • Volumes peaked in May 2010, at the close of the business inventory cycle as customers no longer needed rapid air shipment to restock. • The high growth rates of 20% and above in 2009 and early 2010 were driven by a sharp turnaround in business inventories. The need for air freight was high in demand to quickly restock depleted inventories with the economic recovery. • That cyclical boost to air freight ended in early 2010 as inventories returned to normal levels which were relative to sales. • Air freight industry may see reduction in volume to as the economic cycle shifts from just in time restocking (which benefits air) to ocean transportation as retailers can now better forecast inventory needs.
Upturn in global air traffic volumes in 2010 and January 2011 with additional growth expected in 2011 peak season for US Imports.
US Retail Sales • Overall retail sales in March of this year has increased across the board for the ninth straight month. The sale of commodities such as clothing, electronics, home furnishings and building materials are on the rise. • Economic growth forecasts have been revised higher in the past 3 months, despite the rise in commodity prices. • Factors related to March’s push in sales – Federal and State Tax returns – Warmer weather (home improvement , landscaping equipment and out door furnishings) – New spring attire Source: National Retail Federation
Inventory to Sales Ratio
Air Freight Overview Wrap Up • Forecast for Peak Season 2011 • Unpredictable Pricing Trend Continues • Post‐Recession Air Freight Rebound Over • Hong Kong Remains as #1 Air Freight Hub in Asia (and now) Globally. • Fluctuating and High Fuel Costs Remain an Issue • US Retail Sales Remain Steady • Q and A
