HAS the air cargo industry ‘lost’ 12 years of freighter growth? This was a question I asked in a comment piece last September when comparing the predictions of Boeing’s 2000/2001 World Air Cargo Forecast with the freighter predictions in its 2012 Current Market Outlook.
To recap, the 2000 forecast predicted that the world’s freighter fleet would double from 1,676 aircraft to 3,200 by 2019. The 2012 outlook made almost exactly the same prediction – a doubling from 1,740 freighters to 3,200 by 2031.
That means that, in 12 years, the freighter fleet remained almost static – an increase of only 64 aircraft. Or to put it another way, that had we had the growth Boeing expected in 2000, we would now have something like 2,600 freighters, or 900 more than we actually have.
How does Boeing respond to these numbers? The answer may emerge later this year when a new World Air Cargo Forecast will be published. But to give an idea of the airframer’s current thinking, there is no better person to talk to than Thomas Crabtree, its regional director, airline marketing analysis.
The first thing Crabtree is keen to stress is that an extremely rigorous step-by-step analysis goes into its forecasts. One might say – indeed those in the industry often do – that Boeing has a vested interest in being bullish about the future of freighters. But Crabtree insists that the forecasts are subject to no such pressure.
“Historically, we started forecasting for our own internal business guidance, and it only became a tool for the industry afterwards,” he says. “We build up the forecasts step by step. We look at historical trends, best data, and trade flows market by market. Then we allocate traffic to passenger bellyholds, and build up forecasts carrier-by-carrier and region-by-region before coming up with the freighter numbers.”
Right at the base of the forecast are figures for world trade, and clearly in the last 12 years growth here has been much more bumpy than expected. In 2000, Boeing was expecting economic growth of three per cent per annum, and predicted 6.4 per cent growth in freight and 4.8 per cent in passenger traffic on the back of that.
In fact, economic growth has been only 2.5 per cent. Says Crabtree: “That might not seem much lower, but in fact three per cent is the threshold for normal world economic growth, so 2.5 per cent has felt like a recession.” As for airfreight growth itself, that has averaged 2.4 per cent per annum over the 12 years, though for five years from 2008 to 2012, it was actually negative.
Why did even this more modest growth not translate into a growth in freighters? Crabtree says it is because the overall numbers hide several trends.
One is the extraordinary rise in the price of fuel. “Oil was less than US$30 a barrel at the start of 2000, and when it hit $50 that year, we thought this was a horror,” he rec-alls. “We did not know that the oil price would triple from 2005-2008 and then stay at that level. No one forecast that.”
Despite this – and here is a surprising fact – the number of widebodied freighters has risen. Boeing expected 999 large-to-medium freigh-ters by 2009, and in fact the fleet grew to 929 – not quite what was forecast, but not far behind.
If this sounds a bit surprising, it is because many of the big freigh-ter operators in 2000 – such as Luft-hansa, Singapore Airlines, China Airlines and Air France-KLM – do not seem to have grown their frei-ghter fleets since 2000. But Crabtree can reel off a great list of airlines that did not exist or did not have widebody freighters in 2000 and which now do, including China Eastern, China Southern, Yang-tze River Express, Hai- nan Airlines and Air Bridge Cargo. “Of the Gulf carriers, Emirates had two leased Atlas B747Fs in 2000 and Qatar Airways and Etihad did not exist when we made that forecast,” he says.
“Saudia was not the juggernaut it is now – it got its first MD-11F in 2000. Other carriers that have grown a lot include Ethiopian and LAN Cargo.”
Another source of growth in the widebodied freighter fleet, which is often overlooked, is the integrators. FedEx has adopted the B777F since 2000 and now has 23 in service. DHL now has 29 long-haul freighters, whereas in 2000 it had none. So it is easy to see that perhaps the problem has not been a lack of growth in long-haul frei-ghters, but that the growth has come from new competitors rather than the former giants.
Still, the overall number of freighters has been static, and it turns out that the reason for this is smaller freighters – those with a payload of under 40 tonnes. In 2000, Boeing predicted 1100 would be in service by 2009, but the actual figure was 650.
“What we missed here was fuel prices,” says Crabtree. “Because of them, express operators had to drive unit costs down and, in North America and Europe, there was a big diversion to trucking. This was partly because of the deregulation of trucking in the late 1990s and due to the Maastricht-Shengen agreement in Europe.”
This is all very well, but many still worry about the future of freighters and of air cargo. There is talk of a drift to sea freight. There is the continuing rise of belly cargo. And there are doubts if air-freight growth will in fact ever return to its glory days.
Boeing’s bottom line here is that eventually the USA and Europe – still the main engines of global growth despite the rise of Asia – will have to recover. Crabtree exp-ects a slight recovery by the end of 2013, and thereafter a return to trend or above trend growth.
He admits that currently the 5.2 per cent per annum average growth predicted for freight in the last Boeing forecast “now seems almost unattainable” and hints at how it might be adjusted in the next. “It could go down or it could go up. I invite you to imagine which.”
But, fundamentally, he asks, will the next 20 years reflect the last 12? “I don’t think so. I think things will get better.”
He compares the current downturn to that of the 1930s, which, he says, the Boeing team have studied in detail. “Then it was two years after the stockmarket crash before cargo noticed: it peaked in 1931 and then had a 25 per-cent fall over three years. But it was back to its peak in 1939, and that is kind of where we are at now.”
As for trends such as near-shoring – the bringing of manufacturing back from China to Europe or the USA, which could undermine air cargo – Crabtree is sceptical: “Is a factory opening in your location? Industry will always migrate to where it finds the best cost structures, and air-freight will remain a tool with which industries optimise their supply chain.”
As for the drift to belly cargo: “We have researched this quite a bit, and our studies show that the percentage of air cargo traffic carried on freighters has remained more or less at 60 per cent. It was 56.9 per cent in 2000, rose to a maximum of 62 per cent in 2003, was 61 per cent in 2008 and then 59.4 per cent in 2011. For 2016, we predict 60.9 per-cent and for 2021 60.2 per cent, so it is not a wild deviation.”
How is this possible when Boeing is currently delivering large numbers of cargo-capable passenger B777-300ER aircraft? “Because shippers still prefer, by and large, for their cargo to be moved on freighters, where their needs are not subordinated to the passenger business. Air cargo is accustomed to keeping its products moving, with minimum inventory, so freighters will not lose their valuable role.”
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