Air cargo markets
seem certain to continue expanding this year despite the relative slowdown
suffered in March. And while rates in ‘greenback’ terms
have remained firm on buoyant demand, one analyst notes that pricing
can only be viewed in the context of currency fluctuations.
Freightos, a digital marketplace,
reported last week that air freight rates were currently “very
stable”, adding that the first week of May was the “sixth
straight week with the same average air freight rates,” which
on the China-U.S. lane, it recorded in the $2.90-$5.00 per kg range;
China-Europe hovered at $2.80-$4.50 per kg and Europe-U.S. was steady
at $1.80-$2.70 per kg.
Elsewhere Flexport said ex-Europe
rates in the first week of May were “trending higher” while
demand for airfreight into Europe was rising, in part due to the U.S.
Euro exchange rate, which was encouraging imports from the U.S.
Ex-U.S., Flexport said that some
passenger and cargo-only carriers were indicating that rates would rise
in the coming months, despite the usual increase in capacity during
the summer holiday months.
“Capacity is tightening on most U.S. export lanes due to continued
e-commerce demand,” it added.
“According to a recent UPS
study, online shoppers are increasingly looking to international vendors
“The e-commerce trend places
pressure on air freight, as shoppers look for fast delivery times.
“The increase in demand could
lead to rate increases and capacity shortages.”
Tobias Meyer, COO of DHL Global
Forwarding, told FlyingTypers that supply remained a bottleneck
and this would not change in the near future making air freight a sellers’
“Carriers have learned from
history, and make efforts to secure their current market position by
strictly managing capacity,” he added.
“This entails dynamic pricing
on constrained routes and freighter cancellations even during high demand
periods to optimize load factors.
“Furthermore, carriers have
reduced the share of capacity available to Block Space Agreements, to
secure additional yields out of the highly profitable spot market.”
Meyer, the subject of a wide-ranging
interview with FlyingTypers to be published later this month,
also said the demand side of the equation remained strong.
“Our view is that 2018 airfreight
market volumes will grow significantly in terms of absolute additional
volumes flown,” he added.
“I do not see the market growing
as strong as it did in 2017, but this is due to the fact that the market
was soft until late 2016 and then tightened in 2017.
“The baseline was low.
“We think 2018 markets will
also be tight, but we need to compare it to a very strong baseline and
factor in capacity constraints. In other words, supply will be a limiting
factor to growth.”
IATA Numbers Add Up
IATA predicted growth of 4-5% in
air cargo demand through 2018 despite recording only a 1.7% year-on-year
increase in demand in March measured in freight ton kilometers. But
although the March reading was five percentage points lower than the
February result and the slowest pace of growth in 22 months, IATA said
the slowdown was principally due to the end of the restocking cycle
and softening of global trade.
“It's normal that growth slows
at the end of a restocking cycle,” said Alexandre de Juniac, IATA's
Director General and CEO. “That clearly has happened.”
WorldACD, however, attributed the
March downturn – the analyst recorded global demand growth of
0.9% in the month – to the late timing of Chinese New Year this
year compared to 2017.
Looking at the quarter as a whole,
WorldACD recorded growth of 4.8% compared to a year earlier.
The analyst also said that price
increases so far in 2018 needed to be placed in context.
“We need only point to the
fact that the year-on-year yield increase in Q1 worldwide was 18.6%
when measured in USD, but only 2.7% when expressing it in Euros,”
said its latest report.
“A similar pattern is seen
when comparing yields in USD with yields in almost any other major currency.
“In other words, the large
yield increase in USD can only be understood against the background
of the loss the USD suffered against many other currencies when comparing
Q1-2018 with Q1-2017.
The ‘greenback’ lost
13% against the Euro, 11% against the British Pound, 8% against the
Chinese Yuan and 5% against the Japanese Yen.
“The CFO of a U.S. airline,
thinking and accounting in USD, will be clearly pleased, but his European
counterpart, thinking and accounting in EUR, much less so.
“Add to this that jet fuel
prices have almost doubled over the past two years, and we understand
that the recent large yield increase as measured in USD, may take on
a different meaning for different parties.”
Irrespective of currency fluctuations,
IATA was positive the remainder of 2018 would deliver further growth
for freight, albeit while tempering its outlook based on potential risks
“Looking ahead, we remain
optimistic that air cargo demand will grow by 4-5% this year,”
said de Juniac.
“But there are obviously some
“Oil prices have risen strongly,
and economic growth is patchy.
“The biggest damage could
be political. “Implementation of protectionist measures would
be an own-goal for all involved—especially the U.S. and China.”