The air freight results of the first half-year 2019 have been compared with those of 2018 and show a distinct downward trend with regards to volumes, yields and overall revenues. The question in many airline boardrooms during the past weeks is as to whether we are having to face up to a long-term downward trend for the air cargo industry.

Annual comparisons can be misleading
Both IATA and WorldACD (view chart), who always give us a realistic month-by-month or quarterly rundown on global air cargo developments, seem to be of one mind as far as the first half-year 2019
is concerned.
When publishing their June findings both also now raise the question as to how 2019 in general will turn out.
WorldACD notes that June year-over-year (YoY) chargeable weight carried dropped by almost nine percent compared to the previous year. To make matters worse, the June month-over-month (June versus
May) dropped by just under seven percent. Whereas in previous months special cargo shipments such as pharmaceuticals and perishables managed to stay in the plus figures; year-on-year figures now
also show a -0.4 percent decrease compared to 2018. For some, a very worrying trend despite the relatively high yield this sector still brings.
CargoForwarder has mentioned in previous monthly rundowns that yields are under extreme pressure. In this respect June is no exception. Average yield per kilo is reported as being around US$1.77
- this brings the YoY average yield reduced by -6.3 percent. Another worrying factor considering that average load factors also went down by over 3 percent. This figure would surely have been
even more drastic if the pharma, hi-tech, seafood and flower shipments had not managed to bring in higher revenues.

Various factors play varying roles
One has to bear in mind that 2018 was a bumper year for air cargo and we did not have most of the political and economic upheavals which have so far been faced in the first half of this
year.
However, trend is trend - and whether the present downturn will result in a long-term air freight depression - remains to be seen.
At the moment the negative factors far outweigh the positive ones.
Fuel prices - a major cost factor for airlines - still remain relatively high and show no indication for dropping. Capacity (cargo) has increased with new wide-body passenger aircraft pushed into
the market. This has been one of the major effects on the yield decrease.
The political unrest in almost all corners of the globe is very worrying although some of our global leaders seem to be turning a blind eye to the upcoming economic consequences when things get
totally out-of-hand. The main issue for the rest of this year and the next, will be whether there actually will be an economic downturn. So far, despite a lot of loud rhetoric and the threat of a
trade war, the general economic situation can be seen as being still somewhat stable.
If this changes during the second half of this year, then air freight will indeed be the loser. Many carriers are now seriously looking at which capacity will be needed as of 2020 and fleet
restructuring may well be the order of the day. Lufthansa Cargo for example is reported to be now looking at phasing out their MD-11 freighters even faster than they had planned.
The passenger business continues to boom, and this means more wide-body capacity which is filled upstairs, but in many cases leaves empty belly holds.
New sources of income?
The above question arose lately at one of the cargo conferences.
Generating additional cargo revenues as other sources of income is not an easy task. The airlines are lucky that high-yield cargo such as pharma and hi-tech equipment is still there, but so far
it’s not enough to compensate for the general cargo downfall.
On the contrary, shipping pharma by air is under extreme pressure due to the fact that there seems to be a distinct move by the shippers back to ocean transport. Pharma shippers are still
complaining about the holes in the air freight supply chain which in their view lead to too many disruptions or damaged cargo.
New sources of income are hard to come by and will carriers therefore themselves put the price pressure down the line to their handlers by demanding lower prices?
Hopefully not - but we’ve seen that scenario too often in the past.
John Mc Donagh
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Ben Radstaak (ACN) (Monday, 12 August 2019 13:23)
Hi John,
Do you have any recent indication you can share about the statement that Pharma shippers are still complaining about the holes in the air freight supply chain?
In Amsterdam and Maastricht, as in various other airports, many companies have earned IATA CEIV Pharma Certificates and are doing their utmost to reduce the “many disruptions or damaged cargo”…
Thanks for providing any substance on this statement!
John Mc Donagh (Monday, 12 August 2019 16:56)
Ben,
As far as I can determine, it's not a general complaint, but one which keeps cropping up when talking to shippers and even agents. It's good that CEIV certification is increasing, but that does not necessarily mean that the problems highlighted by shippers in the supply chain are automatically solved. We sometimes tend to forget that ocean freight, although lengthier and cheaper, still offers a more compact door-to-door transport.