July: for the moment at least, things are not getting worse…

August 31, 2019

July 2019 at a glance:
Total Chargeable Weight: -4.2% year-over-year (YoY); +5.1% month-over-month (MoM).
General cargo -7.4% YoY, Special cargo +3.5% YoY.
Direct Ton Kilometers (DTK’s): -4.2% YoY.
Yield stood at USD 1.75 (-7.7% YoY, -1.7% MoM).  The yield in EUR stood at 1.56.
The cargo load factor dropped by 3 percentage-points YoY, and by 0.6 MoM.
High-Tech & Other Vulnerable Goods increased by 6.4% YoY, whilst Pharma & Temperature Controlled Goods rose by 10.8% YoY. Perishables in total grew 3.7% YoY: flowers, fruits & vegetables did best (+6.1% YoY) and meat did worst (-3.4%).

(See www.worldacd.com/yields for more yield developments)

When it comes to YoY-comparisons for the first seven months of this dismal year for air cargo, July 2019 distinguished itself in a relatively positive way. The month showed one of the smaller YoY decreases since January, when the world still looked reasonably OK. Following the deep drop in June (-8.9% YoY in kgs), July seemingly marked quite an improvement (-4.2% YoY).

Yet, a close look at both months shows that performances may have been more in line with each other than the individual monthly figures led us to believe. Compared to 2018, June had five Sundays instead of four, whilst the opposite was the case for July. The change in Whitsunday from May 2018 to June 2019 also played a role. Thus, June was negatively influenced and July positively. For a long time, special products have outperformed general cargo. This trend continued in July 2019, with YoY volume growth of resp. 3.5% and -7.4%. Not surprisingly, we observe a growing interest in the air cargo sector to understand in detail the market dynamics in the various special cargo categories.

Upheaval in international relations has been the order of the day this year. And even though the worst effects of the US-instigated trade war(s) may still have to reach air cargo, the general sentiment in the world is obviously not doing the industry a whole lot of good. According to the article “A stark choice faces Trump in trade war with China” in last week’s International New York Times, “Trump can try to sever the deeply intertwined American commercial relationship with China, or he can prod economic growth to assuage the fears of investors around the planet. But he cannot do both at the same time”. That pretty much sums up the predicament world trade finds itself in. Necessary though it may be to create a level-playing field with China, the actions taken so far do not bode well for world-trade in the short term.

Now that consumer goods have also been targeted for tariff increases, air cargo figures as from August may well take an even deeper dive than shown so far. However, as we all know that averages never tell the whole story, performances at regional, country and trade lane level may remain widely divergent. In almost all of the world’s regions of origin, some countries are much harder hit than others. So far this year YoY revenues (in USD) showed the following pattern: Africa +1.3% but South Africa -5.4%, Latin America -0.9% but Brazil -18.1%, Europe –14.8% but Germany –22.5%, Middle East and South Asia -4.8% but Bangladesh -25.5%. It should be noted that jet fuel prices in July were 10% lower than a year earlier.

Asia Pacific and Europe are the big losers in the year so far (in revenues measured in USD) with YoY negative growth figures of 10.9% resp. 14.8% for outgoing and 11.4% resp. 10.8% for incoming air cargo, whilst the USA ‘only’ lost 6% YoY outgoing (but 8.5% incoming). On a more upbeat note, some airlines must have been pleased filling the large gap left in a number of markets by the demise of Jet Airways. To give but one example, in the market from India to the Netherlands the forwarding world paid the price for the fact that a very important player fell away: Jet Airways’ competitors grew considerably in this market, whilst the average rate increased by 7.5%.