As June gets underway, commercial aftermarket suppliers are bullish on full-year prospects, and one unexpected area contributing to the strong outlook is a traditional laggard: air freight.
Freight-ton kilometers (FTKs) were up 8.5% in April after a 13.4% surge in March, International Air Transport Association (IATA) figure show. While such figures may generate a casual second glance from passenger-traffic pundits, they are cause for celebration among cargo folks, who have seen an average annual growth rate of 3.5% over the past five years.
Capacity figures show the amount of slack in the market; April’s available freight-ton kilometer increase was just 3.9%, which underscores the amount of excess capacity, Canaccord Genuity analysts noted. While belly capacity in new-passenger aircraft has been a huge drain for dedicated freighter operators, a surge in package-moving demand isn’t going to dictate how passenger operators dispatch their fleets.
Since new freighters aren’t exactly flooding the market, this leaves in-service aircraft to pick up the slack. Since most of these aircraft are mid-life or older, this bodes well for aftermarket suppliers. The global freighter fleet is about 1,700 aircraft, or 9% of the air transport fleet.
"The increase in freight traffic, coupled with the drop in dedicated freight aircraft deliveries (such as the 747F) has, we believe, led to an increase in the spend on freighters, which is incrementally positive for the commercial [aftermarket],” Canaccord said. "We believe we will see an acceleration in the growth of the active freighter fleet and we are seeing a near-term uptick in cargo aftermarket spending."
This has helped boost confidence among MRO providers: 60% of suppliers surveyed by Canaccord in late May were more confident in their 2017 prospects they they were three months earlier. "Virtually everyone we spoke with was either at or ahead of their 2017 plans," Canaccord added.
IATA agrees that there is more good news ahead on the freight front.
"Business confidence indicators remain consistently upbeat, suggesting year-on-year FTK growth will remain robust for the rest of the second quarter,” IATA said in its commentary on the April results. "Over the whole year, air freight is headed for a healthy growth rate of 7.5%, supported by strong pharmaceuticals and e-commerce.”