Mon

09

Jan

2017

Was 2016 a Bad Year For Air Cargo?

One would have thought so towards the end of the 1st quarter of 2016 where air cargo revenues and tonnages were showing dramatic de-clines in almost all parts of the globe.
The end of year results however seem to show a turnaround trend and give hope that the complete year will not show a shortfall over the results of 2015, and hopefully result in a continued upward trend for this year September, October and now November highs.

Where will chargeable weights (red) and yields (blue) measured in euros go from here?  -  diagram: World ACD
Where will chargeable weights (red) and yields (blue) measured in euros go from here? - diagram: World ACD

WorldACD published their November findings whereby the month has turned out to be the best one ever with the so-called year-end peak being surpassed almost everywhere.

WorldACD measures results by chargeable weight and they show an almost 7% increase in cargo volumes for November compared to the previous year. Also of note is the distinct shift in cargo volumes from Europe to Asia of a staggering +39%. Five or six years ago it was Asia to Europe which was the moneymaker until the flow started to dry up as of 2010. Asians have more money to spend and use this newfound wealth to “buy European.”

But, that alone won’t keep the air cargo flows and volumes up.

What’s needed is a better net yield for the carriers. And - this it seems is what has grown considerably during the past six months. According to WorldACD, the yield between Asia and the USA went up by 25% whereby that on the sector between Asia and Europe went even higher to +30%. A much needed bottom line boost for the airline cargo world. However, a shadow starts to fall over this new development as the world’s oil producers have finally managed to reach consensus on oil prices and are increasing them rapidly. This will not reflect on 2016 figures, but certainly will during 2017.

Has 2016 recovered - and what about 2017?
Considering the disappointment during the first quarter and the rapid pick up since then, one could assume that once the final December figures are on hand, that the industry came through with a small black eye. If so, this can be seen as a distinct improvement as carriers were also forced to cut back passenger, hence cargo capacity on flights to the Far East as well as to Africa and South America. This gave sales on the belly holds some breathing space, but will it hold?

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The e-commerce trend is unstoppable and the large players are investing billions into their products. So far, it seems that the legacy carriers, apart from talking about it, show little movement in becoming central players within the coming years. They need to ally themselves closer to this segment during 2017, otherwise they’ll “miss the boat.”

New trade wars may well arise because of the threats being issued by America’s new president-elect - and who knows whether he means to carry them out or not. Plenty of uncertainty there which may, or may not affect air cargo development.

The air freight industry has mastered many unforeseen threats and ups-and-downs during the past two decades and still manages to come through at the end of the day. The business world is changing very fast and adaptation is of utmost importance as well as the airlines, handlers and agents showing each other that it will only work if all members get their fair share of the business and its yields.

Good luck for 2017!

John Mc Donagh

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