2JanJJaOctober 2015: yields improve over September, but by less than last year - let’s put them in perspective

For the second month in a row, the worldwide average USD-yield improved month-over-month (MoM), this time by 1%. However, last year’s MoM figure was +1.7%. The YoY yield change was of a wholly different nature (-17.5%), but that deterioration should be viewed against the background of two important developments in 2015 (see below).

Volume wise, October 2015 was not spectacular either. For the now more than 60 airlines in WorldACD’s database, total chargeable weight grew by 1.8%, slightly better than the comparable YoY figures for the past three months. The overall figure was dragged down by the Americas, showing volume drops of 2% in the north and over 10% in Central & South America. All other origin areas showed growth: Asia Pacific 2%, Africa and Europe 4% each, and the Middle East & South Asia (MESA) 7.5%. Inbound, Africa (-4%) and Central/South America (-12%) suffered.

The countries growing most formed a “mixed bag”: Australia, Bangladesh and Vietnam continued their strong 2015-performance, Turkey and Norway also did well, whilst small countries such as Myanmar, Lebanon, Djibouti, Algeria and the Balkan countries, all showed very high YoY growth. No new developments in specific products: pharmaceuticals marched on (+14%), followed by perishables (+5%).

Approaching the end of the year, the time has come to put the 2015 yield developments in perspective. A lot is being made of the stark worldwide yield decreases we have witnessed. However, as stated before, the yield developments of the past 12 months are truly one-of-a-kind: they simply cannot be equated with an extremely serious downward trend in air cargo, as some industry observers seem to want us to believe. We had a look at the vast amount of data at our disposal.  

We compared the first three quarters of 2015 with the same period in 2014. The main lesson is this: at this point in time, getting a better understanding of the fortunes of air cargo will not be helped much by making YoY comparisons of yields-including-charges. This is due to two developments: (1) a stark drop in fuel prices dating back to a little over a year ago, and (2) an increase in the use of all-in pricing.

Fuel prices worldwide have come down to less than 50% of what they were mid last year. The worldwide USD-yield-including-charges decreased by 14% in 2015 compared with 2014, almost exclusively as a direct consequence of lower fuel charges. Thus, the worldwide average price per kg (in USD & net of surcharge effects) stayed at the same level: in some instances it dropped a bit, in others it slightly rose. Coupled with the fact that average prices per kg for all-in shipments remained stable as well, we draw the conclusion that – in terms of market development - the weakness in 2015 has been insufficient volume rather than adverse yield developments.

The use of all-in pricing in air cargo has taken off, increasing from 11% of total shipments in 2014 to 17% this year. Of course, there are differences, some rather large, between geographical markets. In North America, already above average in 2014, the use of all-in pricing further increased, particularly for shipments to Europe. The origin Europe also saw strong growth, except … to North America. Asia Pacific seems much slower than other areas in adopting the new habit.