News / IAG Cargo impacted by softening air freight market, but CEO stays bullish

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In yet more evidence that the second quarter of the year has hit first-half numbers, IAG Cargo announced that its Q2 revenues fell 3.2% to €281m, with tonnage down 1.1% and yield down 2.9% at constant currencies. 

Cargo tonne km (CTK) were also down, 0.4%, while capacity grew by 2.6%.  

“Industry data continues to show a year-on-year decline in the global airfreight market,” said Lynne Embleton, chief executive.  

But while the carriers which have reported first-half results have seen declines, according to WorldACD, the market has been even worse for others, with a worldwide decrease in volumes of almost 9% and a yield decrease of 6.3% in US dollars, giving a year-on-year revenue decrease of almost 15% in June. 

“Only hi-tech (+3.7%), pharmaceuticals (+5.3%), flowers (+4.6%) and fish/seafood (+4.5%) resisted the onslaught, but the first two of these categories paid a price for volume growth in the form of yields falling more than volume increase,” noted the analyst. 

“The further we get into 2019, the poorer the results: the second quarter contributed most to the sharp reversal of air cargo’s fortunes this year, compared with 2018.” 

Some industry players, including Panalpina, indicated that a comparison with 2017 might be fairer. But, noted WorldACD, “this time around, that will no longer work [as a positive], as the comparison between H1 19 and H1 17 now shows a slight decrease as well (-0.6% worldwide, with North America the exception among the larger regions, with an outbound weight growth of 2%).” 

WorldACD also argued that the China-US trade war could not take all the blame. 

“Business between the two ‘supermarkets’ is not worse off than the air cargo business elsewhere. Both volume and revenue development from China to the US were completely in line with the drop in China’s total exports by air.  

“From the US to China, the picture was the same for overall cargo sales, but with one important difference: the volume drop to China was twice as big as the general volume drop from the US, but this was totally offset by a strong yield increase.

“In both directions, most carriers based in North America did markedly better than most of their north-east Asian and Chinese counterparts.” 

IAG Cargo’s first-half revenue was down 0.2%, to €556m, on the back of sold cargo volumes up 0.9% to 346,000 tonnes. CTKs rose 1.1% to 2.8m, while cargo revenue per CTK fell 1.2%, to €0.19. 

“IATA forecasts [the market] remaining depressed, with indicators including the Global Purchasing Manager Index showing a month-by-month contraction in new export orders,” said Ms Embleton. 

“As our business is linked to global trade, our reported revenue reflects the difficult market conditions. 

“While our influence on short-term market performance remains limited, our focus on implementing long-term transformation for our business, and leading the industry in investment and digital innovation, remains unchanged.  

“IAG Cargo now sees 28% of its bookings online and, in June, announced the development of APIs, giving customers the ability to seamlessly add our network to their own booking systems. Our API development has also enabled us to integrate with e-booking platforms from major distribution partners.

“The development of IAGCargo.com now forms a core pillar of our customer offering, with improvements being deployed bi-monthly, greatly enhancing our customer experience.  

“We remain focused on investing in the future of our business to enhance how we deliver for our customers.” 

You can read IAG’s full results here.