June: the clouds get darker … First half 2019: air cargo contracts by almost 5% year-on-year

July 31, 2019

June 2019 at a glance:
Total Chargeable Weight: -8.9% year-over-year (YoY); - 6.8% month-over-month (MoM).
General cargo -12.5% YoY, Special cargo -0.4% YoY.
Direct Ton Kilometers (DTK’s): - 8.6% YoY.
Yield stood at USD 1.77 (-6.3% YoY, no change MoM).  The yield in EUR stood at 1.57.
The cargo load factor dropped by 3.3 percentage-points YoY, and by 2.4 MoM.
High-Tech & Other Vulnerable Goods (the largest category special cargo) increased by 3.7% YoY, whilst the second largest category (Pharma & Temperature Controlled Goods) rose by 5.3% YoY.

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

The first half of 2019 ended with a month of June showing a worldwide decrease of almost 9% in air cargo transported, causing a further widening of the gap with 2018. Combined with a YoY yield decrease of 6.3% in USD, the airlines suffered a YoY revenue decrease of almost 15% in June. Only High Tech (+3.7%), Pharmaceuticals (+5.3%), Flowers (+4.6%) and Fish/Seafood (+4.5%) resisted the onslaught, but the first two of these categories paid a price for their volume growth in the form of yields falling more than volume increased.

Looking at the June performance on the various continents, only the origin Africa showed a modest YoY volume increase of 1.2%, coupled with a 0.6% yield increase in USD. Europe found itself at the other end of the scale: the 12.5% YoY decrease in volume, combined with a yield drop of more than 10% in USD (and almost 8% in EUR), made for a dark picture. In Germany the clouds got even darker… Of the larger regions, Asia Pacific reversed the trend somewhat: it suffered most in May, but least in June, with a YoY volume drop of 7.4% for outgoing, and of 9% for incoming air cargo.

The further we get into 2019, the poorer the results: the second quarter contributed most to the sharp reversal of air cargo’s fortunes this year compared with 2018. Last month, we made the comparison with the first part of 2017, since that could give a more ‘realistic’ view, given the extraordinary growth in 2018, and also – to be honest – to report some good news as well. This time around, that will no longer work, as the comparison between H1-2019 and H1-2017 now shows a slight decrease as well (-0.6% worldwide, with North America the exception among the larger regions, with an outbound weight growth of 2%).

So, what can we say about H1-2019 vs H1-2018? The total weight reported fell by 4.8%. The three largest areas fared worst: Asia Pacific -5.6%, North America -5.5%, Europe -5.3%. Only five ‘sub-regions’ showed growth from their territory: in order of size Australasia (0.4%), East Africa (2.6%), Northern Europe (10%), North Africa (3%) and Central Asia (20.1%). As destinations, North, West and East Africa increased (between 3.1 and 8%), and so did the Gulf Area and Central Asia, albeit minimal. The special cargo categories doing well in June (see above), are also the ones doing well during H1-2019.

Did the trade war between China and the USA have an effect on air cargo between the two countries in H1-2019 compared to H1-2018? Our figures would suggest that was not the case. Business between the two ‘supermarkets’ is not worse off than the air cargo business elsewhere. Both volume and revenue development from China to the USA were completely in line with the drop in China’s total exports by air. From the US to China the picture was the same for overall cargo sales, but with one important difference: the volume drop to China was twice as big as the general volume drop from the USA, but this was totally offset by a strong yield increase. In both directions, most carriers based in North America did markedly better than most of their Northeast Asian and Chinese counterparts.