June 2016: some improvement at last, but belly hold capacity increase still outpaces volume growth

 In need of some positive news after the poor start of 2016, the air cargo business picked up in June. Worldwide chargeable weight improved by 2.7% year-over-year (YoY).

The uptick in June was largely caused by a strong showing of the Asia Pacific region, which grew by 7.1% in incoming and by 6.6% in outgoing air cargo, quite a change form earlier months. Europe as a destination continued to do well (+4.8% YoY), but Africa and Central & South America fell back, in incoming as in outgoing air cargo volumes. With a drop of almost 11%, African imports were particularly hard hit. North America performed on average, while the region Middle East & South Asia (MESA) was lacklustre with a performance below the other areas in the northern hemisphere.

Most product categories grew in June more or less in line with General Cargo, except pharma, which showed an increase of over 10%. Thanks to this growth, with yields well above average, the overall USD-yield in June remained stable, i.e. the same as in May 2016.

The first quarter of 2016 hardly lent itself to a proper comparison with the same quarter a year earlier. Therefore, the second quarter may be a better indicator of what 2016 will turn out to be: it showed an average YoY volume increase of 2.1% worldwide. The smaller country pairs outgrew the larger ones, as the top-100 country pairs grew by much less than average (0.6% only). Yet, twenty-one of these top-100 grew by more than 10%. India figured in six of these twenty-one country pairs, China East and Germany in five, and Hong Kong in four. As far as destination areas are concerned, growth was only recorded for Asia Pacific and Europe, both over 5%.

Much is being said about the cargo capacity growth as a consequence of growth in passenger aircraft. What are the consequences for air cargo? We are now in a position to share our first observations regarding the relationship between volumes carried and bellyhold capacity offered.  We looked at Q2 YoY changes on the routes between MESA and Europe, and between Europe and North America.  For these routes, the growth of cargo capacity on board of passenger aircraft outpaced the % increase in cargo carried on these aircraft, in some cases quite considerably.

Bellyhold capacity grew most from MESA to Europe (+6.8%), but a good part of that capacity growth was taken up by cargo carried (+4.9%). In the other direction, the figures were +5.3% and +2.2% respectively. For Europe to North America, however, the picture was more worrisome: a bellyhold capacity growth of 5.5% combined with a volume decrease of 1.5%. The result was slightly better in the other direction, i.e. from North America to Europe, where bellyhold capacity grew by 3.2% and cargo carried in the bellyhold dropped by 0.7%.

For the routes between MESA and Europe, more than half of the airlines reporting capacity data to WorldACD, notched up a higher volume growth than capacity growth for the bellyhold, thus improving their cargo loadfactors on their passenger aircraft. For the routes between North America and Europe, the picture was quite different: only 20% of the  airlines reporting improved their cargo loadfactor on passenger aircraft.