"We Are Struggling:" Air Cargo Performance Slumps Across Major European Air Ports 

The German ZEW headline number on Tuesday crashed to -44.1 versus -28.5 expectations and -24.5 last. The indicator measures economic sentiment shows the Germany economy could be teetering on the edge of a manufacturing recession.

The most recent escalation in trade disputes between the US and China, the risk of a full-blown trade war and competitive devaluations, has put extreme pressure on the European economy, that is visible in declining freight performance at major airport cargo hubs.

Data from the Airports Council International (ACI) reports freight performance at Europe's airports in 1H19 has been faltering, with only 30% of the top ten cargo gateways reporting YoY growth, reported JOC.

In 1H19, Madrid, Barcelona, and London were the only airports to record YoY growth. Frankfurt, the top air cargo hub in Europe, registered a drop of -2.5% YoY.

ACI said cargo gateways at airports across Europe, on an overall basis, recorded a -3.5% fall in 1H19.

Olivier Jankovec, director-general of ACI Europe, said European air freight data experienced significant deterioration in June, indicates that the rest of the summer through early fall could remain in decline.

"The slump in freight traffic is where it really bites at the moment," he said.

"And it is not getting any better, with June registering a drop of 7.1%, the worst monthly performance in more than seven years."

Air France-KLM freight data from July show freight markets continued to slump. Transported tonnage for the Franco-Dutch carrier declined 6% YoY last month.

Denmark's DSV reported a drop of 5% YoY in 1H9 of its air freight segment, mainly due to recessionary conditions in the European auto sector.

The German economy is in decline, and that is also damaging Italy, France, Poland, and Spain.

Europe's automobile industry plunged 8% in sales in June, the ninth monthly decline in the last ten months.

"The fact that the air freight market is down 5% year to date is worrying," said Jens Bjørn Andersen, CEO of DSV.

"We are struggling to figure out what is driving this negative volume in air freight apart from automotive. You speak to one customer and he tells you one thing, but speak to another and he tells you almost the opposite. I think that some of the emergency shipments that we saw a year ago have gone and their supply chains are being managed more efficiently now."

Growth rates in air freight cargo prices have remained depressed across all major global shipping routes this year. The most significant declines can be seen in Frankfurt to South East Asia, -28% YTD; Hong Kong to North America, -23.5% YTD; and Hong Kong to North America, -23.5% YTD.

International Air Transport Association (IATA) reported global air freight volumes in 1H19 fell for the eighth consecutive month. Demand, measured in freight ton-kilometers, dropped 4.8% in June YoY.

"Global trade continues to suffer as trade tensions — particularly between the US and China — deepen. As a result, air cargo markets continue to contract," said Alexandre de Juniac, IATA director general and CEO.

European air freight data suggests that the probability of an economic recovery in Europe in 2H19 is low. What could be around the bend is a recession that starts, or has already stared in Germany.