2JanJJaJuly 2016: modest volume growth in Northern hemisphere with yields holding their own

With a modest year-over-year (YoY) weight growth of 1.8% worldwide, July unfortunately did not consolidate the upswing we witnessed in June, when we recorded a YoY growth of almost 3%.  Whilst the southern hemisphere origins of Africa and Central & South America suffered (-1.2% resp. -1.8%), other origin areas showed growth ranging from 0.2% in Europe to 3.7% in Asia Pacific. The latter looks to be on its way to reclaim the position of air cargo's engine as Europe is losing a bit of its recent lustre.

In terms of yields, measured in USD, news was slightly better, as the worldwide yield remained stable month-over-month (MoM). Only Europe and North America had a yield drop compared to June, all other origin areas showed a slight increase.  For the year 2016 through July, USD-yields YoY dropped least in Central & South America (-3%) and Africa (-5%), but most in Asia Pacific (-21%).

Taking a look at individual markets, we see that 21 of the Top-100 show a YoY growth of more than 10% in the year so far. Of the Top-20 individual markets, Germany - China East and China East - Germany stand out with a volume growth of 20% resp. 12 %. China East also does very well to the USA Pacific States (+13%), while Germany - India grew by 11%. The worst performing of the Top-20 individual markets are Colombia - USA Atlantic South, Germany - USA Midwest, USA Pacific States - Japan and Hong Kong - USA Pacific States, all recording a YoY volume decrease of more than 10% for the year so far.

The 2016 results being what they are, one of the improvements airlines may seek is optimizing their distribution, whilst forwarders may look at grabbing a larger share of the pie. Better market insights will thus become more important.

Europe & North America (not surprisingly) have the largest number of forwarders active in air cargo (each around 3,000 in H1 2016), and Africa the least. In between, we find the Asia Pacific area at 75% of the European number and Middle East and South Asia (MESA) at 50%. The USA has around 2,500 active forwarders, the second "largest", Germany, has 700. The volume per forwarder differs considerably from one country to another. Forwarders in Japan have the highest average volume. Their average is 2x the average for Hong Kong, 3x for China, 4x for Germany, 7x for the USA , 8x for the UK.

More than half of all forwarders do 95% or more of their business in one country only. These "local players" make up 64% of all forwarders in MESA and 40% in Europe. They capture 31% of all air cargo worldwide. The highest volume share for this group is found in Latin America (54%); their share in China is 45% and in the USA 24%. Will these parties increasingly become takeover targets?

Forwarders looking to expand, will want to take note, as airlines may be out to simplify their worldwide distribution arrangements.