- Sector that benefits from the fall in the oil price
- Growing use of air transport in Asia, thanks to the emergence of middle classes.
- Road transport sector: bloated sector.
- Maritime freight sector: overcapacity among actors.
- Air sector: threatened in Europe by competition from Gulf countries.
Maritime transport prices
(BDI and SCFI indices)
Just like the bankruptcy of the world’s 10th-largest player, Hanjin freight, in August 2016, the maritime freight sector suffered considerably in 2016. This historic bankruptcy is six times larger (547,606 TEU-twenty-foot equivalent units) than the bankruptcy of US Lines in November 1986 (first company to go bankrupt). These difficulties are primarily tied to the weakness of world trade, which grew less than 2% in 2016 (compared with 3.5% on average between 2012 and 2014). This historically low level is below global growth (2.5% according to Coface). In addition, significant overcapacities within the sector are putting pressure on prices. In 2016, global capacity increased by 1.3 billion TEU, in particular due to investments by the five largest maritime shipping companies (Maersk Line, MSC, CMA CGM, Cosco, and Evergreen), which represent 55% of global supply (72% for the top 10). These overcapacities expose the sector’s actors to a tariff war, which threatens the most fragile among them. Lastly, with low oil prices in 2016, pressure is intensifying on maritime freight prices, as confirmed by the 20% decrease in the SFCI index between 2014 and 2016.
In 2016, air traffic remained steady. According to the International Air Transport Association (IATA), airlines generated a net average profit margin of 5.1% (versus 4.6% in 2015). The robust demand in the passenger sector (+6.7% in 2015 and +6.9% estimated in 2016) is likely to offset the disappointing growth in air cargo (+1.9% in 2015 versus +3% estimated in 2016).
 Export rate (Shanghai) for the container transport market.
The overcapacity in the maritime sector, which transports 80% of global trade, will continue to negatively impact the sector in 2017. Airlines will benefit from continued low oil barrel prices. After generating record profits in 2015 and 2016 (respectively $35.3 and $35.6 billion), profits are expected to be down 16% at $29.8 billion in 2017. Nevertheless, these results are still 2.5 times higher than the average profits generated between 2010 and 2014 according to IATA.
While the European airlines were able to take advantage of fall in fuel prices in 2016, they continue to suffer from a belated restructuring of the sector (regulations, inadequate infrastructures). With a 10-year delay behind their US counterparts (presence of national barriers in telecoms in Europe, etc.), they are expected to make in-flight Internet more widespread in 2017 (whereas 86% of the US fleet was equipped in 2015). European airlines, which are expected to generate barely 20% of global profits in 2017, will likely suffer from higher oil prices, with revenue per passenger far below their US competitors ($7.84 versus $22.4 in 2016).
In North America, airlines generated 60% of total global profits in 2016, benefiting from lower oil prices as well as the effects of the sector’s restructuring over the last decade. With the profits posted, they could continue to expand their offering over the coming financial year. Asian airlines should benefit from airport infrastructure investments, which are expected to be the highest in the world between 2016 and 2020, potentially reaching average levels four times higher than in Europe.
In Western Europe, and particularly in France, companies in the road transport sector have benefited from lower fuel expenses in 2016. The number of insolvency proceedings continues to decline (-1% over one year in August 2016). In Eastern Europe, the road transport sector continues to suffer from the reduction in transport volumes since early 2015. On the one hand, these volumes have been affected by the Russian recession and the embargo on foodstuffs from the European Union, faced with competition from companies in Central European countries. On the other hand, Western European markets (Germany, France) in 2015 implemented measures that protect them. Due to weak competition in the region, prices should increase by 4% in the region in 2017.
Global economic growth will not be strong enough in 2017 (2.7% according to Coface versus 2.5% in 2016) to revitalise demand in the maritime, rail, road, and air transport sectors. The number of passengers should increase by 5.1% in 2017 according to IATA (versus 5.9% in 2016).
In Western Europe, road transport companies will benefit from a rebound in traffic volume in the first half of 2017. In France, this rebound should be driven by the construction sector, expected to grow by +2.5% in 2016 according to Coface. In the United States, the moderate level of GDP growth will adversely affect the sector. In Latin America, activity growth will be better oriented. However, transport infrastructures are still underdeveloped, considerably increasing freight costs and mechanically reducing demand capacities. According to the World Economic Forum’s infrastructure index on 144 countries, Chile is the best positioned country in the region (49th), followed by Mexico (65th), Brazil (76th), Argentina (84th), Colombia (88th), and Peru (89th).
As for airlines, the “Brexit” prospects and terrorist attacks affected demand for overnight stays in Europe. For the first time since 2009, EasyJet’s annual profit fell in 2016. In the United States, after contributing 1.7% to growth in 2016, household consumption should slow down significantly in 2017 (1.3% of the contribution according to Coface) and weigh on passenger air traffic, which is expected to increase by only +2.6% in 2017 according to IATA. Air transport capacity is expected to grow very markedly by +7.5% in South America in 2016 (+5.6% in 2015) because of stronger demand and better connections with North America. Nevertheless, the region continues to be affected by poor economic and political conditions, particularly in the largest regional economy, Brazil, even though its growth should be stronger in 2017 (+0.4% according to Coface). In Asia, the emergence of middle classes is positive for the aeronautical sector. In China, for example, the percentage of households earning more than USD 35,000 dollars per year is expected to triple by 2022 and drive growth in the sector. In India, the number of air transport users should increase fivefold in 20 years (according to Airbus). The slowdown in global trade should strongly affect the maritime transport sector and especially small companies, concentrated for the most part in Asia.
Last update : December 2016