October & 1st half November: Asia Pacific gets further ahead, but China sees first yield/rate drop

November 20, 2020

Worldwide air cargo contracted by 1/3 year-over-year (YoY) in April 2020. Since that very steep decline, the sector has bounced back steadily, resulting in an October-performance in kilograms of “only” 11% below October 2019, but 8% above September 2020. Airline revenues from air cargo kept rising: +48% YoY, thanks to a still very high price per/kg, which has hovered between 60% and 67% above last year (in USD) for the past 4 months, culminating in an October increase of 66% YoY and 4.3% MoM. All this happened with freighter capacity increasing by 5% MoM, whilst cargo capacity on passenger aircraft grew by 11% MoM. The load factors for the two aircraft types increased by a modest 2% respectively 1% over the month of September.

At the risk of sounding like a broken record, we report that – among the three largest regions – the origin Asia Pacific did best again in volume in October, falling 7% YoY, but recording the one-but-highest YoY increase of price/kg (+82.4%). The origin area Middle East & South Asia (MESA) almost doubled its prices for the month of October YoY. The MoM price increase ex-Asia Pacific was 9.4% against a worldwide average of 4%: in 2019 the MoM increase ex-Asia Pacific was 5.5%. For the first 10 months of the year, Asia Pacific was the only region keeping its YoY volume loss in single figures (-9.8%), coupled with a record YoY revenue increase of 59%, more than double the worldwide average of 29%. Most striking is the fact that the share in worldwide air cargo revenues, generated from business originating in the Asia Pacific countries, has gone up from 41% in 2019 to 50% in 2020.

The chart below shows how the world’s top-50 air cargo markets performed (MoM) (yield/rates in USD/kg). The markets between Western Europe and Mexico stand out.

China receives the bulk of the attention of air cargo pundits these days. Understandably so: the country is thriving in terms of air cargo price increases, as evidenced by a MoM growth in price/kg  (in USD) of 15.2% (in 2019 the MoM change was 10%). From China to Europe the MoM increase was even higher: 18.7% (14.8% last year). Air cargo from China to North America attracted a price/kg of 5.11 USD, whilst to Europe the average was 4.33 USD. The weekly trend in both markets is upward, which brings us to the preliminary picture for the first half of November 2020.

Worldwide, the kilograms transported in the period Nov 1 - Nov 15 (H-1 Nov) stood at 48% of the October-total (from Asia Pacific 51%, Europe & North America 47%, Central & South America 46%, Middle East & South Asia (MESA) 44%, and Africa 42%). In other words, any MoM growth in November will have to come from the second half of the month. Weekly volumes in H-1 Nov were more or less the same as in the last week of October.

Yields/rates (per kg) continue their upward movement: worldwide the average went from USD 3.13 in the last week of October via USD 3.25 in the first week of November to USD 3.28 in the second week of November. In other words: in week 1, the week-on-week (WoW) increase was 3.9%, in week 2 it was much less (0.9% WoW).

For the first time in many weeks, yields/rates from China dropped. Whilst they were up by 3.8% WoW in the first week of November, in the second week they were down by 2.5% WoW: China-Asia Pacific -9.5% (at USD 2.20), China–Europe -0.9% (at USD 5.08), China-North America -6% (at USD 5.93).

Incoming business into Asia Pacific saw a downward trend: yields/rates dropped by 0.8% WoW on average, whilst this figure was slightly up for all other destination regions.

The average load factors were slightly lower in H-1 Nov than in October. We did not see a WoW change in last week’s data, except for the load factors ex-Europe which went up by more than 1.5 percentage points.