Air cargo market 'getting back to normal'? Still a long way off, says WorldACD

(C) Elnur

By 18/08/2020

Air cargo volumes were up month-on-month in July, while freight rates were down, but the continuing capacity crunch means the market is anything but "normal". In its latest market report, air cargo number-cruncher WorldACD notes global volumes ticked up 8.2% on June, but year-on-year, this was down 18.5%. Likewise, airfreight per kg was up 62%, year on year, for the month, but down on June by 9%, falling from £3.12 to £2.83.

"So, are things getting a bit more normal?" WorldACD asks. "One of the other pointers to the answer is to be found in capacity data: there is such a lack of capacity in the market that 'normality' still seems a long way off." Indeed, Cathay Pacific, for example, released its July traffic figures on Friday, showing passenger flight capacity remained at just 7% of pre-crisis levels.

The airline carried 102,129 tonnes of cargo and mail last month, a year-on-year decrease of 39.8%, with capacity, measured in available freight tonne km, was down 44.5%. Group chief customer and commercial officer Ronald Lam said: "Cargo continues to be the better performer of the business... Certain markets performed particularly well, notably the Indian subcontinent, which recorded a noticeable uptick as local lockdown measures were eased.

We also saw reasonably strong month-end rushes for airfreight demand in Hong Kong and the Chinese mainland." WorldACD also notes big variations in volumes and rate changes from region to region in July. For example, it says origins Europe and MESA (Middle East & South Asia) added the most kg to their June figures, up 13% and 14%, respectively.

Furthermore, prices in Europe were stable, with just a 2.5% month-on-month decrease, compared with Asia Pacific, which saw a 14.4% drop in rates and just a 6% volume increase. "Business from China has captivated the air cargo world more than ever since the start of the Covid-19 crisis," WorldACD said. "Coupled with a lack of capacity, this business has indeed attracted very high prices. "Yet, the sky-high prices posted on the internet, as so-called evidence of what happens in the China market, are often based on limited numbers of shipments (sometimes even 'one-offs') and therefore are, at best, 'anecdotal evidence'.

This needs to be put in perspective." Nevertheless, rates out of Asia Pacific overall have indeed dropped significantly since the dizzying heights of May, for example, with WorldACD noting July's rates at some 41% lower, at £3.38 per kg. Meanwhile, in its weekly report, published yesterday, Freight Investor Services (FIS) noted there had been little change in the direction of the market, with near-term pricing remaining unpredictable, and there was a "general sense of constrained capacity and cargo growth", looking ahead to the fourth quarter.

FIS said: "There has been a follow-the-leader push to own capacity in the near term, with a number of airlines and forwarders engaging in potentially rigid very long-term agreements.

"In the background, we have noticed a substantial push for index-linked agreements, with air FFAs being pursued as a means to manage the instability of rates."

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