Major Asian combination carriers post strong traffic and revenue growth

Air cargo volumes worldwide started improving significantly towards the end of 2020 from a second-quarter low point, but freight tonne kilometers (FTK) fell by 10.6% industrywide, according to the International Air Transport Association (IATA). However, cargo load factors, yields and revenues recorded high levels, benefiting the air cargo industry. In Asia, carriers recorded a 13.2% decrease in FTKs over the twelve-month period, but the rebound in manufacturing activity in China and export orders in South Korea and Japan drove an acceleration in Q4 2021. The World Trade Organization is forecasting that trade of goods will grow by 8% after dropping by 5.3% in 2020, so prospects for exports are favorable for 2021, while purchasing managers index (PMI) levels keep rising, indicating that manufacturing activity trends are positive. Carriers worldwide were forced to adopt a series of extraordinary measures in product organization, marketing and cost management in order to reverse the downward trend by driving up revenue. To maximize revenue opportunities, most Asian carriers increased their cargo operations and started operating passenger freighters, which led to a rise in the available tonne kilometers (ATK) and revenue tonne kilometers (RTK), as seen in Figures 1 and 2. These passenger freighters operated as cargo flights. All major Asian carriers with freighter fleets showed growth in both ATKs and RTKs, with Singapore Airlines and ANA leading the group. Figure 1 – Overview of ATK Growth for Cargo Flights

Source: Cargo Facts Consulting Analysis of Carrier Performance Data and IATA WATS Figure 2– Overview of RTK Growth for Cargo Flights

Source: Cargo Facts Consulting Analysis of Carrier Performance Data and IATA WATS With the flight suspensions and reduction of passenger capacity, cargo supply and demand remained tight, but airlines showed improvements in revenue and yields caused by the capacity and demand imbalance in the market. Demand for medical supplies, especially during Q2 2020, replaced the weaker traditional flows. Figure 3 shows the unit yield in $US cents per Revenue Tonne Kilometer (RTK) and this is calculated using cargo revenue reported by carriers in FY2020. The trend we observed here was that airlines with smaller freighter fleets outside China — such as ANA, EVA Air and Singapore Airlines — maximized the utilization of their freighters and saw their revenues ramp up with high demand in the pharmaceutical and e-commerce segments. Most carriers also adjusted their freighter network schedule by modifying the proportion of long-haul and short-haul freighter routes to optimize the flight network and improving freighter efficiency. Figure 3 – Overview of Unit Yield vs. Traffic in 2020

Source: Cargo Facts Consulting Analysis of Carrier Performance Data and IATA WATS Asian cargo carriers have also played an instrumental role in the battle against COVID-19 by transporting the COVID-19 vaccines intercontinentally, ensuring operational readiness for the safe and timely transportation of the temperature and time-sensitive pharma shipments. Singapore Airlines, Korean Air and Cathay Pacific signed agreements with UNICEF to support the COVAX initiative while others, like ANA and Asiana, have delivered the Pfizer and Moderna vaccine to South Korea and Japan starting in March 2021. Carriers have also been seizing opportunities for charters and new commodities. In addition to the focus on e-commerce, operators such as EVA Air or Cathay Pacific have strengthened their product to offer to include special transportation of cold chain goods, fresh perishables, precision electronic components and automation equipment. The combination of all these initiatives has also led to revenues increasing across the cargo divisions of all carriers, making up over 50% of total revenues in most cases. Table 1 shows an overview of the cargo revenue for the carriers we analyzed. Table 1 – Overview of 2020 Cargo Revenue for Selected Carriers

Regarding the outlook for cargo market supply and demand in 2021, cargo capacity from Asia to Europe and North America will remain insufficient for meeting customer demand while freight rates are expected to remain high.

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Estimating the US inbound cross-border e-commerce market size

Passenger-freighter flights ramp up to meet peak demand

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