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
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).
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.
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
“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.”
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 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
“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
“Cargo revenues will continue to do
well in 2018, reaching $59.2 billion, up 8.6 percent from 2017 revenues of $54.5