September 2018: first YoY decline since March 2016 - Yield premium for home carriers?

October 31, 2018

The worldwide air cargo yield moved upwards to USD 1.95 in September 2018, 8.5% higher than in September 2017, and 5 cts higher than in August 2018. Measured in Euro's, the worldwide yield increased by 11% year-over-year (YoY).

(See for more yield developments)

Given the marginal growth in the world's air cargo reported over the past months, it can not come as a big surpise that one day we would have to report a month in which the total worldwide volume contracted compared with the previous year. That day has now arrived:  for the month of September, we recorded a decrease in worldwide volume of 0.9% year-over-year (YoY), the first negative growth figure in two-and-a-half years. Airline revenues kept growing, however, thanks to a strengthening yield. At the same time, fuel cost were around 32% higher than one year ago.

To avoid reading too much in the September decline, let's look at the context.
Compared with September 2017, the month had one Sunday more and one Friday less. This seemingly trivial fact makes for a drop of about 1-1.5% in worldwide air cargo volumes, according to our earlier analysis of daily patterns. Another factor: the performances of Hong Kong (-7.7% YoY)  and Japan (-4.8% YoY), certainly negatively influenced by the September typhoons.

One other noteworthy development: whilst the origin China as a whole showed growth both YoY and MoM, the market from China to the USA was in decline: -1.8% YoY and -4.4% MoM, the first consequences of Trump's trade war?

The first three quarters of 2018 showed 2.8% volume growth YoY, accompanied by a yield increase of 14.2% in USD and of 6.6% when measured in EUR. Whilst the origin region Central & South America stood out for its 11% volume increase, Europe noted the best YoY revenue performance (+21% when measured in USD, + 13% in Euro). Europe was also the fastest growing destination (+5.4% in volume YoY). To underscore the importance of the transport of specific products: all special product categories outperformed general cargo, with pharmaceuticals, express and live animals still recording double digit growth.

Do home carriers always extract a yield premium?

This month we take a look at the yield differences between carrier groups in their respective home markets. Over the past 12 months, airlines based in the Middle East & South Asia ("MESA"), realized on average a yield premium in their home markets of 27% over all other carriers active in the MESA-carriers' home markets. The corresponding figures for other carrier groups were much lower: carriers from Europe realized a 10% yield premium in their home markets, those from Africa 7% and those from Asia Pacific 6%. Only the carriers from the Americas did not find this kind of yield premium. In their home markets, their average yield trailed the average of competitors by 3%.

Interestingly, the European airlines as a group were the only ones coming up with a yield premium not only from their home markets (10%), but also to their home markets (3%) and in 'third country' markets, i.e. markets with both an origin and a destination outside their home turf (+7%). All other carrier groups had to accept the fact that yields realised in origin areas outside their home markets for business to their home markets, stayed below the average yields realised by other airline groups in these markets.