February 2019: air cargo volumes continue to fall – Chinese New Year not the only culprit

March 31, 2019

February 2019 at a glance:
Total Chargeable Weight: -5.8% year-over-year (YoY); -11.3% month-over-month (MoM).
General cargo -8.5% YoY, special cargo +0.5% YoY.
Direct Ton Kilometers (DTK’s): -5.5% YoY. (Given the -5.8% change in volume, this means that average distance per shipment hardly changed).
Yield dropped to USD 1.79 (-6.2% YoY, -3.4% MoM).  The yield measured in EUR stood at 1.58.
The cargo load factor dropped by 3 percentage-points YoY, but rose by 3 MoM.
Revenues (USD) from the smallest shipments (0-50 kg) dropped 4.9% YoY, those from the largest shipments (>5000 kg) suffered much more (-13.2% YoY).

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

Over the past few weeks, the specialist air cargo media already mentioned that February 2019 had not been a good month for air cargo. But how bad was it? Was it bad everywhere, or were there some bright spots shining through the gloomy stories?

In every year’s first quarter (Q1), monthly figures are influenced – more than in any other quarter - by the lunar calendar, for the simple reason that the world’s air cargo fortunes are seriously linked with a diminished business activity around Chinese New Year (CNY) in some of the largest air cargo markets.

The negative effect of CNY on business activity usually manifests itself from one week before (mainly inbound China & Hong Kong) till 3-4 weeks after the day (mainly outbound). This year, the date was February 5, meaning that the month of February absorbed almost all of the CNY-impact. Thus, the full effect can safely be gleaned from the combined Jan/Feb data. In 2018, the effect lasted through the first week of March.

The area Asia Pacific took the largest beating in the first two months of 2019: outgoing volumes were down YoY by 6.8%, incoming by 6.1%, against the backdrop of a 3.6% worldwide decrease. All other regions also suffered in incoming traffic, with YoY percentages ranging from -5% for Central & South America to -0.6% for North America. In YoY outgoing business, performances ranged from +2.5% for Africa to -3.8% for North America. Looking at the individual months, January showed a lull in the business to Asia Pacific (with a commensurate drop in outgoing business from the origins Europe and North America), but in February it was Asia Pacific’s outgoing business that suffered most, particularly to the destinations Europe and North America.
The usual CNY-dip in business from China & Hong Kong seemed to last longer this year.

Taking a slightly longer view, we should draw your attention to the fact that Jan/Feb 2019 were still better than the first two months of both 2016 and 2017. Yet, assuming that the decrease in world air cargo in Q1 2019 will come to around 3%, the emerging trend looks quite worrisome for the sector:
    •    Q1 2018: +5% YoY
    •    Q2 2018: +3% YoY
    •    Q3 2018: +1% YoY
    •    Q4 2018:  -1% YoY
    •    Q1 2019:  -3% YoY

At this moment in time, it seems harder and harder to achieve the 2% to 3% growth predicted for the full year 2019 by some of the industry players.

Of the top-25 markets, only 5 showed volume growth YoY in Jan/Feb: the UK, Australia, Kenya, Vietnam and Ecuador. For a number of countries, volume growth above 3% seems to be within grasp. Of the 100 largest origin countries, 31 showed a more than 3% YoY volume growth in the first two months of the year, 7 of which also managed to get a yield increase in USD. Apart from Turkey, none of these 7 belonged to the top-30 markets, however.

In revenues (measured in USD), 30 countries registered more than 3% growth YoY in outgoing air cargo. Among the larger origin countries, Mexico, Ethiopia, Chile, Norway and Turkey gained 10% or more. The same was true for a number of smaller origins, notably Costa Rica, Morocco and Cambodia. In other words, whilst overall expectations for 2019 may not be very impressive, a number of individual countries are likely to buck the trend.