AIRFREIGHT STATE OF THE INDUSTRY

JANUARY 2022

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1
Content

• Summary

• Key Updates

• Market Developments

• Market Outlook 2022

• Demand

• Supply

• Utilization

• Rates

• Jet Fuel

• Backup material: 1) Global Capacity Development; 2) Global Capacity vs Demand Development

DHL | Airfreight State of the Industry | Bonn | January 2022 2

Summary
Demand
• Volume growth dipped
slightly but continue to
remain very strong; +14%
YoY growth in Oct 21
• Demand surge still spread
across various sectors
• E-commerce continues to
contribute strongly to
robust air demand
• Cargo demand to remain
strong along with new tech
product launches and
upcoming Lunar New Year
• PPE movements strong
due to COVID situation
• Healthy PMI index,
historically low I/S ratio &
peak season indicate
strong air cargo demand
• Continued conversion of
ocean freight to air as
capacity constraints
continue
Source: IATA, Seabury, DGF Desk Research
DHL | Airfreight State of the Industry | Bonn | January 2022
Capacity
• Incremental improvement in overall capacity; still affected
and down by -17% in Dec 21 vs Dec 19
• PAX capacity down by nearly -28% in Dec 21 vs Dec 19
Carriers
• CX announced substantial reductions to long-haul capacity in
Q1, 2022 due to latest aircrew quarantine measures in HK;
capacity affected
• CX assessing options to increase long-haul COP capacity in
February, however, this is likely to be limited.
• EK cut down 12% of capacity starting 1st Jan 2022; freighter
capacity affected; GRI announced to most destinations
• US, UK remove travel ban from Southern Africa, however the
restrictions remain in place for now for other countries
Jet Fuel
• Prices remain high reaching $91/b in Dec 21
• Prices remain high in ‘22; average expected at $75/b; political
unarrest in KZ pushing oil prices higher
Rates
• Rates further increased in Nov 21. Now +126% higher vs
‘19 baseline
• Rates expected to remain at high levels compared to
previous years for guaranteed access to capacity
Regulation/News
• CX reduce long haul freighter capacity by 80 to 100% in
Q1-2022 due to the latest aircrew quarantine regulations;
also cancel some PAX flights
• Other cancelled flights include freighter options several of
which are suspended until further notice
• CN’s strict approach to COVID has left the world’s second-
largest economy shut off from international travel; <500
weekly inbound flights vs 10,000 in pre-pandemic times
• Omicron surge forcing travel restrictions worldwide
• Major airports across ASPA, EU experience labour shortage.
Warehouse activities affected. Expected delay in operations
further affecting transit times.
• Severe nationwide power shortage in CN caused factory
shutdowns halting production lines; impact yet unknown
but global supply chain disruptions expected
3
Key updates
CN situation
• As the variant of concern Omicron has been detected in various places around the world, Hong Kong Government has imposed intensive preventive measure
• CX is exploring alternative operating modes to increase long-haul freighter capacity however such capacity is likely to be limited and will take time to
implement
• Regional cargo-only passenger flight (COP) services will operate as scheduled in Q1, while COP services to AMER will remain suspended in January and only
a skeleton COP schedule to EU and SW Pacific will be operated
• Due to stricter disease prevention measures, LX cancels 2 passengers per week for HKG-ZRH until further notice, estimated impact is 25T per flight
• Flight cancellation of major airports in mainland CN including both passenger flights and freighters, from 1 January 2022 as follows:
• Chengdu (CTU) -Air China (CA) & Qatar Airways Cargo (QR) cuts 50% of capacity
• Chongqing (CKG) -QR cuts 50% of capacity
• Guangzhou (CAN) -QR cuts 25% of capacity
• Shanghai (PVG) -48% of capacity reduces by varies airlines

MEA situation
• Import embargo imposed by Bahrain and Saudi Arabia on exports from Lebanon is still in effect until further notice
• Morocco, Zambia, South Africa, Zimbabwe and Senegal most affected in terms of capacity due to recent flight restrictions imposed
• Etihad signs SLA with Astral Aviation and Kenya Airways to expand its Pharma connectivity within Africa for vaccine distribution

Source: DGF Desk Research

DHL | Airfreight State of the Industry | Bonn | January 2022 4

Market Developments
• IMF forecasts world
economy to grow more
Economic Outlook Demand than 4% in 2022;
GDP Growth by Region Demand Development in Tons (% change YoY) emerging Asian
2021F 2022F 2023F 2024F 2025F
CAGR
38 economies to add more
(2021-2025) 33
27
31 value
EURO 5.10% 3.66% 2.31% 1.70% 1.67% 2.33%
MEA 3.72% 4.56% 4.14% 3.56% 3.36% 3.90%
21 21 19 • Demand growth
14
9 remained very strong in
AMNO 5.42% 4.30% 2.82% 2.67% 2.56% 3.09%
3 2021; now ~+5%(YTD
AMLA 5.73% 2.32% 2.60% 2.83% 2.76% 2.63%
-2 -1
Oct) above pre-
ASPA 6.02% 4.83% 4.47% 4.33% 4.38% 4.50%
-7 pandemic levels
Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct
World 5.47% 4.24% 3.37% 3.11% 3.09% 3.45% 20 21 21
• Overall scheduled
capacity decreased by
-17% in Dec 21 vs Dec
Supply Jet Fuel 19; any improvement
Global Jet Fuel Price $/ bbl seen vs 2020 is due to
Supply Development (000 Tons) Passenger Freighter Crude Oil vs. Jet Fuel Price (USD per bbl)
Global Crude Oil Price $/ bbl last year’s very low base
150
91 • Lack of cargo capacity
83
7,553
100
still remains a key
obstacle for the rising
40% demand
50
60% • Jet fuel price reached
0
$91/b in Dec 21; high
Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- prices likely to affect
20 21 11 12 13 14 15 16 17 18 19 20 21
already slow belly
capacity recovery
Source: IHS Markit Group, IATA, Seabury, Economic Data Factbook, IMF

DHL | Airfreight State of the Industry | Bonn | January 2022 5

2022– What to expect?

SERVICE DISRUPTIONS ROBUST DEMAND

• COVID outbreaks impacting operations • Demand is expected to remain strong;
•
•
Airport backlogs amid staff shortage
Country quarantine regulation changes; 5 1 •
filling inventories
PMI index>50 indicates strong volume
contingency measures; flight cancellations in coming months
• Economic recovery & GDP growth 4%+
in 2022

COVID SITUATION- VACCINE

ROLLOUT 4 2 CAPACITY RECOVERY
• Slow vaccine rollout will delay passenger travel • Capacity recovery slow; will remain
• Booster shots required for already vaccinated restricted
people to ensure safety/immunity • PAX resumption on certain Tradelanes;

3
• Emerging variants pose threat to further addition of belly capacity; Flight
lockdowns and closures cancellations will affect the recovery
• PPE movements to continue • Freighter capacity growth expected
RATES REMAIN ELEVATED
• Rates remain high vs 2019
• Demand supply imbalance expected to continue
• Extra capacity at a premium
DHL | Airfreight State of the Industry | Bonn | January 2022 9
 • Demand growth shows
slight slowdown but still
Demand remained high for all
regions; overall growth
+14% YoY in Oct 21;
Global Volume Development Regional Volume Development breadth of volume growth
still across all sectors
In Tons (% change YoY) In Tons (% change YoY) • In YTD Oct comparison,
Aug 21 Sep 21 Oct 21

demand is ~+5% higher

37
than 2019 levels
38 34 • Ocean congestion still
33 adding to air volumes
31 28 • ASPA export cargo
27 25
23
24
23 movements grew;
21 21 21 emergence of Omicron
19 19
17
18 boosted PPE movement
14 15 15
13 13 13
14 • E-commerce boost to
9 10 demand remained very
8
3 7 strong; AMNO import
volumes mostly due to
-1 Auto, Tech, Fashion, e-
-2
commerce movements
-7 -2
Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct
• Strong import volumes
EURO MIDEAST AFRICA ASPA AMNO AMLA GLOBAL
20 21 21 to LATAM mainly due to
ocean congestions
• EU outbound demand
remained steady
• PMIs above 50 mark for
key markets indicate high
Source: Seabury
*I/S- Inventory volumes in coming
to Sales ratio
months
DHL | Airfreight State of the Industry | Bonn | January 2022 7
 • Global capacity still
affected & down -17%
against Dec 19
• Belly capacity improved

Supply slightly in cue with

increasing vaccinations;
still -28% below pre-
COVID levels
Global Capacity Development
• Emergence of Omicron
2019 2020
Global Capacity Development (000 tons) 2021
variant led to flight
cancellations; belly
-17%
10,000 recovery affected
8,000 • ASPA capacity expected
6,000 to be limited until end of
4,000 7,271 7,449 7,553
2022 Beijing Winter
6,194 6,399 6,625 7,071 7,161 6,959
2,000
5,353 6,004 6,040 Olympics and Chinese
0
Holiday Spring Festival;
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec strict quarantine
measures leading to led
to flight cancellations
Trade Lane Capacity Development
• Transatlantic capacity
Lane Capacity Development (YoY % change) All configurations Passenger Freighter improved but EU to AMER
belly capacity still far
ex ASPA- ex EURO- ex AMNO- ex AMLA-
below 2019 level
95 101 99 100
77 82
91 • LATAM to AMNO freighter
52 56
46
62 56 capacity increased; US-
40
17
26
18 17
35 34 LATAM capacity improved
5 11 10 17 8 11
7 7 7 4 but still restricted
-2
-12 -7 -6 • Capacity gradually
Intra AMNO EURO ASPA AMNO AMLA ASPA AMLA EURO AMNO EURO improving but still facing
hurdles mainly due to
COVID situation;
Source: Seabury; Note that The YoY increase vs 2020 is due to severe decline in capacity in 2020 insufficient to support
current demand
DHL | Airfreight State of the Industry | Bonn | January 2022 8
Utilization
• Recovery in capacity
lagged rebound in cargo
Global Cargo Load Factor Development demand - gap between
supply (AFTK) and
FTK AFTK
%-Change FTK and AFTK
demand (FTK) appears
20 close in a YoY
10 comparison but remains
0
high when compared
-10
-20
against 2019
-30 • Resilient cargo volumes
-40 against reduced capacity
-50
2016- 2017- 2018- 2019- 2020- 2021-
led to high load factors
Jan Jan Jan Jan Jan Jan in all regions
− Freight Load Factor
Regional Cargo Load Factor Development (FLF) is an indicator of
how tight is the
Nov 19 Nov 20 Nov 21
FLF in % (FLF = FTK/AFTK) demand-supply
balance
70 6 • Industry-wide FLF in
60
50 Nov 21 grew by +6
40 percentage points
30 66 63 63 65
57 50
60 57 50 43
54 50 44 44 45 50
58 56 compared to pre-crisis
20 40 41 40
10 Nov 19
0 • Slight dip in demand
EURO MIDEAST AFRICA ASPA AMNO AMLA GLOBAL
growth made CLF less
tight in Nov 21; capacity
still remains restricted
Source: IATA; 2021 onwards FTK and AFTK are being compared against same month in 2019; Africa FLF data unavailable for Jul 21

DHL | Airfreight State of the Industry | Bonn | January 2022 9

 • Rates remained +126%
higher in Nov 21 than
2019 baseline and
Rates-Global Carrier Rate Development +30% more than a
higher 2020 baseline
• Rates continued to
remain high as demand
Carrier Rate remains strong against
%-change (2019 = 100%) Baseline (2019 = 100%) 2020 2021 capacity; ocean
congestions, flight
%
cancellations added to
250 the woes
• Rates will remain high
2021 as we continue to see
limited capacity
200 • Emergence of new
variants adding further
2020 pressure on volatile
126% market
150
• Rates to/from
ASPA(especially CN)
likely to remain high
due to ongoing space
100 2019
constraints; new
variants; Winter
Olympics; Lunar New
Year
50
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec • Airlines continue to
manage yields
aggressively; extra
capacity still available
at a premium(except
Source: IATA; average freight rate including other charges
to/from SHA)
DHL | Airfreight State of the Industry | Bonn | January 2022 10
Jet Fuel • Jet fuel price touched
$91/b in Dec 21
• Prices averaged $71/b
Jet Fuel Price Development in 2021
Global Jet Fuel Price $/ bbl
Crude Oil vs. Jet Fuel Price Development • Operational unrest
Global Crude Oil Price $/ bbl
expected to increase
150 prices
140
• Political unarrest in
130
91 Almaty ; KZ = 3% of
120
worldwide oil production
110
(1.6 million barrels per
100
83 day )
90
• Prices have touched
80
$98/b already in Jan 22
70

60 • Production expected to
50
outpace slowing
growth in global oil
40
consumption, especially
30
in light of renewed
20
concerns about COVID-
10 19 variants. likely to
0
Jan-
bring stability in price in
Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan-
11 12 13 14 15 16 17 18 19 20 21 ‘22
• EIA expects prices to
average $75/b in 2022
Source: DGF Desk Research and $68/b in 2023

DHL | Airfreight State of the Industry | Bonn | January 2022 11

BACKUP
Global Capacity Development
Capacity Development by Aircraft Configuration January 2019 – December 2021
In tons Passenger Freighter Total Capacity

WHO declares a
global pandemic

1,000,000

-17%
800,000

600,000
+21%

400,000

200,000

0
Jan Feb Apr Jun Aug Oct Dec Feb Apr Jun Aug Oct Dec Feb Apr Jun Aug Oct Dec
19 20 21 21

31% 40%
69% 60%

Source: Seabury (Total Capacity includes marginal Combi aircraft contribution)

DHL | Airfreight State of the Industry | Bonn | January 2022 13

Global Capacity vs Demand Development
Capacity vs Demand change gap
YoY % change Capacity Capacity Demand Demand
’21 vs ’20 ’21 vs ’19 ’21 vs ’20 ’21 vs ’19

40
35
30
25
20
15
10
5
0
-5
-10
-15
-20
-25
-30
-35
-40
-45
-50
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Source: Seabury

DHL | Airfreight State of the Industry | Bonn | January 2022 14

Abbreviations
Explanation of Abbreviations
AFTK - Available Freight Ton Kilometers
AMLA - Latin America
AMNO - North America
ASPA - Asia Pacific
ATK - Available Ton Kilometers
Bbl - Barrel
bn - Billions
CAGR - Compound Annual Growth Rate
CLF - Cargo Load Factor
FRT - Freighters (in the airline industry)
FSC - Fuel surcharge
FTK - Freight Ton Kilometers (also referred to as Cargo Ton Kilometers or CTK)
IATA - International Air Transport Association
ICAO - International Civil Aviation Organization
LY - Last Year
mn - Millions
MoM - Month-on-Month
PAX - Passengers (in the airline industry)
PPE - Personal Protective Equipment
Pts - Percentage points
RPK - Revenue-Passenger-Kilometers
SSC - Security surcharge
T - Thousands
YoY - Year-on-Year
YTD - Year-to-Date

DHL | Airfreight State of the Industry | Bonn | January 2022 15