The gradual route to recovery to pre-Covid market conditions continued for the global air cargo industry in August for a fourth-consecutive month, according to new data.
Clive Data Services and TAC Index found that tear-on-year (YOY) growth for the full four weeks of August showed a further narrowing of the gap in international air cargo volumes to -17 per cent versus August 2019. This compares to a -41 per cent YOY disparity in April, since when month-on-month demand has improved.
In August, the receding gap in the year-over-year decline between capacity and demand resulted in a global dynamic loadfactor drop from 70 per cent in July to 68 per cent in August, but this is still exceptionally high considering that August is traditionally air cargo’s ‘slack season’ – registering at 8 per cent points higher than the corresponding performance in August 2019.
Looking at traffic flows from China, Clive Data Services’ analyses for August confirms that previous concerns of “hardly any demand for capacity” once the PPE peak subsided have not materialised. Volumes in the last week of August were ‘just’ 4 per cent less than for this same week in 2019, “not great, but by no means a disaster,” commented managing director, Niall van de Wouw.
He added: “Our August data shows the year-over-year decline in volumes is decreasing. The capacity crunch is still there but is becoming slightly less and, as a result, loadfactors and yields are going down and becoming closer to pre-Covid levels, even though they are still elevated.
“Airline cargo departments have never been in control of their own destiny, and they’re still not, but they are in control of the present and short-term in deciding where to place their cargo capacity. Whereas cargo has often been regarded as the ‘freeloader’ of the airline industry because it has always been a by-product of far greater passenger revenues, right now it is passengers who are the ‘freeloaders’ because cargo is the main source of revenue for many airlines and helping to get passenger flights back into the air.
“The massive uncertainty is when will passenger demand return and reverse the tables? The huge idle fleet of passenger aircraft needs to start flying again but no one is expecting that to happen soon in terms of great quantities of capacity. In the meantime, air cargo will continue to have its day in the sun and combination carriers will have to hope this can sustain their slimmed down operations until passenger confidence and bookings return.”
With capacity ex China around 19 per cent less than in August 2019, air cargo yields on this lane remained at an elevated level; approximately 25 per cent higher than a year ago and about 35 per cent in the same period on the Transpacific lane, according to TAC Index market intelligence.
In August, the price decline over July 2020 was 5 per cent on Transpacific lanes and 2.5% on routes to EU.
Data for the Atlantic trade lane reflected the pressure on the dynamic loadfactor – based on both the volume and weight perspectives of cargo flown and capacity available – of additional capacity entering the market. The westbound loadfactor remained strongest but dropped from 88 per cent in early July to 82 per cent by the end of August. Eastbound loadfactor over the same period reduced from 72 per cent to 65 per cent, but, because of the reduction of capacity relatively to last year, these figures are still 20 per cent points higher than in 2019.
The latest capacity and loadfactor developments are clearly reflected in the still elevated but declining yields across the Atlantic, whereby eastbound yields have taken the greatest hit. The timeliness and the accuracy of the August data is a true reflection of market performance, TAC Index says, noting that differences within the same month can be quite substantial (up to 25 per cent in some cases). Consequently, relying only on monthly averages can be misleading or risk growth opportunities being missed.