Panalpina air freight chief says peak season will be slow and airlines to tighten capacity

posted on 22nd July 2019 by Justin Burns
Panalpina air freight chief says peak season will be slow and airlines to tighten capacity

Panalpina’s global head of air freight – Lucas Kuehner – says there will be another peak season this year in October – but he predicts it will not be as big as last year or 2017.

The air freight industry has been battling headwinds this year as trade tensions and political uncertainty have led to a slowdown.

Kuehner said: “Starting in October, there will be the usual peak season in air freight – if not as strong as last year or 2017, for sure. Carriers will try to manage their capacity more tightly in an attempt to lift rates. As in previous years, we are already in talks with our customers to assess their requirements and secure capacity.

“Should bottlenecks with commercial carriers become an issue, we can provide fast, agile and reliable solutions with our Charter Network. We offer scheduled charters with our 747-8F and long-standing partners, and ad hoc charters where we have important framework agreements already in place.

Lucas Kuehner

“Operationally, we will again be ready and well-prepared both in the air and on the ground. And just as important, our operations are backed up by processes and technology that translate into high responsiveness and visibility, as well as competitive prices for our customers.”

Panalpina estimates the global air freight market decreased five per cent in the second quarter of this year after a two per cent decrease in the first quarter of 2019 and its air freight volumes outperformed the market, but profitability still decreased.

The ongoing trade conflict between the U.S. and China has clearly not helped the air freight market. We must also not forget that we are comparing against an exceptionally strong first half-year of 2018,” Kuehner said.

“A comparison with the first half-year of 2017 gives a more realistic picture. Compared to 2017, our unit profitability was better and EBIT stable. The difference is that in 2017 the market got stronger with every quarter and rates increased accordingly. The market in 2019 is heading the opposite direction.

“Volumes have been going down, especially in the automotive sector, which has shifted into reverse gear. Decreasing air freight volumes translate into falling rates and this has put pressure on margins. In the current market environment, it is difficult to achieve last year’s performance.”

Kuehner noted the two sectors that have been struggling most are automotive and technology but in healthcare the trend is positive, he said and Panalpina is investing in its capabilities in this sector, which requires more specialisation.

He said in the past decade it has become increasingly difficult to predict the development of the global air or ocean freight markets.

“Dealing with uncertainty and preparing as best as we can is part of our business. However, 2019 is shaping up to become the year, when the interdependencies of the two markets – as a result of the complicated political, regulatory and macroeconomic environment – have reached such a high level of complexity that it is even harder than before to predict what the final trade volumes and freight mix of our customers will be,” Kuehner said.

“For a third-party logistics provider that can only mean one thing: We have to look at air and ocean freight more holistically. And we have to be strong across all products, from air freight to ocean freight to logistics – operationally and financially.”