December 2018: a “double whammy” to end a year of steadily decreasing growth

January 31, 2018

December at a glance:
The worldwide air cargo yield moved downwards to USD 2.00 in December 2018, 2.2% lower than in December 2017, and 3.7% lower than in November 2018. Worldwide yield in EUR increased by 1.7% year-over-year (YoY).
Total chargeable weight decreased by 3.5% YoY, and by 5.8% month-over-month (MoM). The jet fuel price (in USD/barrel) in Dec 2018 was approximately the same as in Dec 2017.

(See for more yield developments)

Viewed against the market developments we witness since September, December closed the year ‘in style’, that is to say by recording negative YoY growth. The month can be justly characterised as weak: the ‘double whammy” of negative volume growth with negative yield growth made for a YoY airline revenue drop of 5.6% in USD (1.9% in EUR). The last week of 2018 was particularly worrisome with volume a serious 10% below the same week in 2017…. December volumes from the larger regions (Asia Pacific, Europe and North America) dropped by larger percentages than those from the smaller areas.

For the market most clearly in the limelight these days, we noted that – in YoY volumes in December  – China & HKG did better to the USA (-3.6% YoY) than to the world as a whole    (-4.8% YoY). In the opposite direction, the picture was quite different: USA to world (-3.4% YoY) did significantly better than USA to China/HKG (-8% YoY).

Air cargo showed two distinct faces in the year 2018 as a whole. Each month in the period Jan-Aug showed YoY volume growth, albeit in ever smaller percentages as the year progressed. Still, the 3.7% YoY overall growth in that period looked good, given the fact that 2017 had been a bumper year. In the period Sep-Dec, however, things started to look much less positive. Three out of the four months showed a YoY volume decrease, resulting in an overall decrease for this period of 0.6%. Volume for the whole year was 2.2% up on 2017.

The YoY yield rise (in USD) was 15% in the period Jan-Aug against 4.2% for Sep-Dec, a development that seemed to be in line with fluctuations in the oil markets: jet fuel became rapidly more expensive in the months leading up to September, whilst going down in the later part of the year.

Another significant development in 2018 was the recovery of the origin Central & South America (C&SA), which increased its outgoing volumes by 8.4% YoY. In terms of airline revenues (in USD), the region also stood out with a 16% growth YoY. At the other end of the range, we find the origin Africa, which generated airline revenue growth of only 4.2%. Worldwide, airlines added 13.2% to their revenues in USD (8.7% when measured in Euro’s).
Five smaller origin countries looked like havens of stability, each managing to record a YoY volume growth 12 months in a row: Chile, Costa Rica, Cambodia, Uganda and Mozambique.

Among the various air cargo categories, pharmaceuticals kept its leading position in YoY volume growth (+14.8%), followed by Dangerous Goods and Vulnerables/High Tech (+7.7% each). Fruits & vegetables were the only category with negative YoY growth (-0.2%).
All in all, specials increased by 5.4%, as general cargo increased by 0.9% only.

Just last week, the Economist wrote about a phenomenon it called “slowbalisation”, making the case for deeper links within regional blocks with supply chains sourcing closer to home in North America, Europe and Asia. Do we notice the same in air cargo? Yes and no. Against an average air cargo growth of 5.7% worldwide in the years 2016 to 2018, the region Asia Pacific showed 6.2% growth for intra-regional volumes. However, the overall importance of intra-regional air cargo flows as a percentage of the worldwide total, steadily declined between 2014 and 2018 from 20.4% to 19.1%.
Looking at “near-sourcing” from another angle: the YoY increase in volume in 2018 (2.2%) was smaller than the increase in Direct Ton Kilometers (3%), meaning that the average distance between origin and final destination of shipments slightly increased.