The gradual route to recovery to pre-COVID market conditions continued for the global air cargo industry in August for a fourth-consecutive month, according to fresh volume and yield data from two of the industry’s leading analysts, CLIVE Data Services and TAC Index.
Year-on-year (YOY) growth for the full four weeks of August showed a further narrowing of the gap in international air cargo volumes to -17% versus August 2019. This compares to a -41% YOY disparity in April, since when month-on-month demand has improved. Capacity gains, however, have added to the downward pressure on both CLIVE’s ‘dynamic loadfactor’ and average yields.
In August, the receding gap in the YOY decline between capacity and demand resulted in a global dynamic loadfactor drop from 70% in July to 68% last month, but this is still exceptionally high considering that August is traditionally air cargo’s ‘slack season’ – registering at 8% points higher than the corresponding performance in August 2019.
CLIVE Managing Director, Niall van de Wouw stated, “Looking at traffic flows from China, CLIVE Data Services’ analyses for August confirms that previous concerns of hardly any demand for capacity once the PPE peak subsided have not materialised. Volumes in the last week of August were ‘just’ 4% less than for this same week in 2019, “not great, but by no means a disaster.”
van de Wouw added, “Our August data shows the YOY decline in volumes is decreasing. The capacity crunch is still there but is becoming slightly less and, as a result, loadfactors and yields are going down and becoming closer to pre-COVID levels, even though they are still elevated.
“The massive uncertainty is when will passenger demand return and reverse the tables? The huge idle fleet of passenger aircraft needs to start flying again but no one is expecting that to happen soon in terms of great quantities of capacity. In the meantime, air cargo will continue to have its day in the sun and combination carriers will have to hope this can sustain their slimmed down operations until passenger confidence and bookings return.”
With capacity ex China around 19% less than in August 2019, air cargo yields on this lane remained at an elevated level; approximately 25% higher than a year ago (basket CN/HK ->EUR) and about 35% in the same period on the Transpacific (basket CN/HK->US), according to TAC Index market intelligence. The general pricing difference on the two compared trade routes more than doubled YOY. In August, the price decline over July 2020 was 5% on Transpacific lanes and 2.5% on routes from HK/CN to EU. The weekly fluctuations become visible when looking at a more detailed level; for example, PVG-AMS in the period June 29 – August 31 show prices increased by 22%, peaking on August 03 at 10 % higher than on the last day of the month.
Robert Frei, Business Development Director at TAC Index said, “When looking at the general pricing trends, we see the reaction to supply and demand happening more swiftly. This obviously has also to do with most carriers and forwarders breaking their contracts during the crisis and the fact that procurement is now done on a shorter-term basis. With shippers also finding forecasting even more difficult during the present conditions, this situation may continue for some time.”
“All parties are currently looking at new ways of negotiating contracts, possibly using Index Linked Agreements (ILA) or new risk management tools outside of the physical market. Such instruments are well-known and successfully practiced in other industries but are new to the air cargo market. Air freight has for many carriers and forwarders been the main source of revenue over the last couple of months, which also shows in their results. The importance of air cargo to the recovery of global trade has become very visible and recognised,” Frei added.
