Capacity adjustments: How airlines are responding to weak cargo demand

By Seabury Group
09.03.2013 · Posted in Air, Loadstar posts

Cargo carriers are struggling to keep sustainable load factor levels in an industry still affected by overcapacity. In fact, demand and supply have been out of sync ever since 2011, where ATKs rose by 6.4%, far outgrowing FTKs (+0.9%)1. From that point onwards, cargo demand followed a near flat line while supply kept a positive – albeit less steep, general trend. (To see the charts more clearly, please click on ‘read more’ at the bottom of the article.)

Amidst this challenging environment, pressure is on freighter operations to adapt accordingly. As of mid-2013, several carriers have been cutting down their capacity in order to maintain their load factor levels.
Most large Asian airlines have managed to contain supply at or even below demand growth (with exception of Thai and Cathay). On average, Asian airlines recorded load factor of 59% in the first half of the year, only conceding one point compared to last year1. This is a stark difference with drops that have been recorded since the highs of 2010.

European carriers too have maintained load factors in what can be considered as an encouraging move towards a recovery of the demand/supply balance. As an example, Lufthansa’s load factor increased by about 1 point in the first half of 2013, thanks to demand-led capacity management. The airline is also saying it is moving into a supply-based capacity, predicting a market recovery in the second half of the year2.