Air cargo firms feel the pressure from plunge in freight prices
By Victoria Bryan
BERLIN (Reuters) - Following a sharp fall in freight prices air cargo companies are set to trim their fleets and jobs further to battle overcapacity while looking for new partnerships and products to carry, industry executives and analysts say.
Global trade volumes fell for the first time since 2009 by 1.7 percent between the final quarter of 2015 and the first quarter of 2016 and the International Air Transport Association has lowered its growth forecast for air freight demand in 2016 to 2.1 percent from 3 percent.
And while the impact of Britain's Brexit vote on the UK air freight market remains uncertain, prices for air freight generally are down about 15-20 percent compared with last year due to capacity outstripping demand by a factor of three.
"It's a landslide," Lufthansa Cargo (LHAG.DE: Quote) CEO Peter Gerber said on Tuesday. "With prices falling so quickly, we have to cut costs."
Freight carriers are also seeking new types of business, or focusing on higher-margin areas, such as delivering pharmaceuticals.
Lufthansa Cargo for example says it is looking at dealing with customers directly, rather than via the freight forwarders that currently account for up to 95 percent of its business.
And it has been in talks with online retailers such as Alibaba (BABA.N: Quote) and Amazon.com (AMZN.O: Quote), which have been reviewing their logistics chains to ensure goods can be sent to customers more quickly and reliably, although nothing has been agreed.