Air cargo terminals: Solid earnings growth despite the pandemic

Currently, the air cargo load factor has increased 19% while air cargo yield has increased 77% compared to the pre-pandemic level.

Vietnam’s air cargo volume increased 6.5% YoY in 9M21 despite the Covid-19 outbreak in 3Q21.

On the supply side, as 50% of air cargo carrying in the holds of passenger aircraft, the air cargo market faces a serious lack of capacity. On the demand side, air freight demand strongly recovered from the pandemic as the global economy recovered. Strong recovery in Asia – North America reflects the strong China and U.S economies.

In the post-pandemic era, VNDirect expects the air cargo market to maintain the strong performance as:

First, at the current pace of vaccination, it would take one year to achieve the level of global immunity, resulting in strong global economic recovery, which will help increase global trade activities including air freight.

Second, when the international skies are re-opened, air freight capacity will be increased. Many airlines will also expand to air cargo transportation as they saw the great potential of the market during the pandemic. These factors will help airfreight rates become attractive, giving its fast and secure transportation, leading to the steady increase of global air cargo volume in the post-pandemic era.

Third, sea freight rates have skyrocketed recently, making air freight rates more competitive compared to sea freight rates.

Vietnam’s air cargo volume increased 6.5% YoY in 9M21 despite the Covid-19 outbreak in 3Q21. VNDirect expects Vietnam’s air cargo volume growth in 4Q21 to improve as (1) Vietnam is gradually controlling the pandemic, and (2) the import demand of the U.S, Europe, China economies will strongly increase at the end of the year. Thus, it expects Vietnam’s air cargo volume to grow 10% in FY21F. In FY22-30F, Vietnam’s air cargo volume is expected to grow at 9.7% CAGR according to CAAV.

In 9M21, SCS’ air cargo volume increased at a higher pace of 8.6% YoY. SCS is capturing Tan Son Nhat International Airport (TIA)’s air cargo volume growth by expanding its current terminal capacity from 200.000 tonnes p.a to 350.000 tonnes p.a while its sole competitor Tan Son Nhat Cargo Service Company JSC (TCS) has no room to expand. VNDirect believes air cargo terminal companies that are capable of expanding capacity like SCS will benefit from this steady growth.