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   Vol. 17 No. 3
Monday January 22, 2018

Exciting 2018 Busting Out All Over
2018 Busting Out All Over
This past Monday, workers began hanging up red lanterns on a street in Xi'an city, northwest China's Shaanxi province, to celebrate the upcoming Spring Festival, or Chinese New Year.
While the kickoff on Friday, February 16, for “Year of the Dog” is less than a month away, the high-flying air cargo business worldwide is already soaring.

Air cargo rates have dropped dramatically in recent weeks, but capacity remains scarce and prices are expected to gain ground again ahead of factory shutdowns for the Chinese New Year holiday (Year Of The Dog), which begins February 16.

No Dog Days For Air Cargo

     The TAC Index covering Hong Kong to North America fell from a year high of USD $5.57 per kg on December 4 to $3.73 on January 1.
     Rates from Hong to Europe followed a similar pattern, reaching a two-year high of $3.28 per kg on December 4, before tumbling to $2.85 on January 1. (Source: TAC Index - www.tacindex.com).

Backlogs Abound

     Yet, despite the declines around the holiday shutdowns, which enabled carriers to clear backlogs, most indicators suggest prices will rebound in the weeks ahead as retailers restock ahead of CNY, not least because capacity remains hard fought over, and urgent shipments are pricing far higher than index averages.
     Web-quotation platform Freightos said U.S. airlines canceled 7-10 scheduled flights on China to the U.S. routes between December 22-30, while Russia’s AirBridgeCargo and China Southern Airlines also posted flight schedule cancellations on the China-U.S. route. But Freightos said cargo space on the route remained tight, and cancellations were pushing rates back up.
     In Europe, the intermittent bad weather took its toll on operations over the holiday period, increasing backlogs and contributing to higher air freight rates, added Freightos.

Staying Wet In Fashion

     One chartering source told FlyingTypers the wet-lease market was currently tight due to multiple factors.
     “All the guys who currently have the wet leases are renewing their contracts,” the source explained.
     “But there is an additional squeeze on the market not only through e-commerce, but because the previous American administration didn’t fund the U.S. Air Force properly.
     “A lot of those grey tails are not available to lift the military work and also there is a crewing issue – they haven’t been training enough crews, so there’s not enough crew to fly the planes.
     “So with Trump sabre-rattling, and moving a lot of equipment around, the U.S. military is sucking up a lot of capacity.
     “It is interesting times, a lot of people are trying to wet lease planes and there really isn’t a lot available. Those that are, are very costly—and that’s global.”

Forwarders Upbeat

     A forwarding source in Asia said the outlook for demand and rates for 2018 was positive. He also confirmed the current lack of wet-lease capacity. “It is a bit early to say how the build-up to CNY is panning out,” he added. “Generally speaking, most market participants are quite bullish about CNY and the whole of 2018. It is very difficult now to secure wet-lease freighters on the market: there’s no capacity left, or at least very limited availability.
     “Factories should be in full production by week three of January so that will be a good indication for the rest of the lead up to CNY.”

By The Numbers

     The latest volume figures underscore the pricing patterns seen in the run-up to the holiday season, with November proving another belter for the air freight sector. WorldACD said that the record global volume figure recorded in October was quickly relegated to the history books in November.
     “November beat October by 1.3 percent,” said the analyst’s latest report. “For the third month in a row, the year-on-year yield increase in USD had to be written in double figures, this time the highest since the recovery after the 2009-crisis: +17.3 percent year-on-year.”
     With volumes growing 7.8 percent in November compared to a year earlier, airline revenues in USD for the month were more than 26 percent higher than in November 2016. “The most striking feature of the November figures was the yield increase from Europe,” said WorldACD. “Measured in EUR, yields jumped by almost 19 percent year-on-year to all destinations worldwide.”

IATA Bullish For Now

     IATA now expects cargo operations to continue boosting airline revenues through 2018. The Association said volumes uplifted by carriers globally in 2017 totaled 59.9m tons, up 9.3 percent year-on-year, and forecasts they will expand a further 4.5 percent to 59.9m tons in 2018, further boosting the bottom lines of carriers.
     IATA forecasts global industry net profit will rise to $38.4 billion in 2018, an improvement from the $34.5 billion expected net profit in 2017, revised from a $31.4 billion forecast in June.
     “The cargo business continues to benefit from a strong cyclical upturn in volumes, with some recovery in yields,” said the Association. “The boost to cargo volumes in 2017 was a result of companies needing to restock inventories quickly to meet unexpectedly strong demand. This led cargo volumes to grow at twice the pace of the expansion in world trade (4.3 percent). Cargo yields are expected to improve by 4.0 percent in 2018—slower than the 5.0 percent in 2017.
     “While restocking cycles are usually short-lived, the growth of e-commerce is expected to support continued momentum in the cargo business beyond the rate of expansion of world trade in 2018.
     “Cargo revenues will continue to do well in 2018, reaching $59.2 billion, up 8.6 percent from 2017 revenues of $54.5 billion.”

If You Missed Any Of The Previous 3 Issues Of FlyingTypers
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Vol. 16 No. 100
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Chuckles For December 29, 2017
Lightbox For Christmas 2017
Buttercake For Christmas
Lifting For Christmas
Vol. 17 No. 1
The Billion Dollar Baby
Chuckles For January 8, 2018
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Take A Tip From The Tulip
Chuckles For January 17, 2018
Dhaka Cargo From The Heart
Punch Up Chicago Cargo

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