Back in 1958, Dinah Washington
recorded “What a Diff’Rence a Day Makes.” The wonderful
“Queen of the Blues” entreated:
“What a difference a day made
Twenty-four little hours
Brought the sun and the flowers
Where there used to be rain…”
Is A Song In 2017
Had “Sweet Dinah”
recorded that lovely tome more recently and replaced ‘day’
with ‘year,’ she could have been singing about air cargo markets
in late 2017.
The sun is, indeed, now shining, and burning
away years of “Stormy Weather.”
WorldACD may have been
doffing its cap to the talented Ms. Washington in its latest analysis,
published at the start of November.
“Exactly one year ago, our monthly
message discussing the September 2016 performance, opened with the following
words: ‘We had not seen it for two years, a volume growth of more
than 5 percent year-over-year (YoY), and yet, that was September's gift
to the beleaguered air cargo world.’
“What a difference a year makes...
“The industry has moved from dejection
about continuing meager results to an upbeat feel about the business.”
And with good reason. September 2017 was
the thirteenth consecutive month of YoY volume growth of well above 5
percent. And, although growth of 8.8 percent represented a YOY stumble
on the 10+ percent gains enjoyed for much of this year, it was a marginal
stumble and easily explained away.
As FlyingTypers has previously
noted, the upturn in demand from September 2016 onwards will necessarily
make year-on-year comparisons less flattering from now on than they have
thus far during 2017.
So in the context of the wave air cargo
caught just over a year ago, 8.8 percent YoY growth this September was
no mean feat.
Moreover, as WorldACD noted, September
2017 contained less of the traditionally strong cargo days than a year
earlier, and a series of devastating hurricanes affected operations in
Even so, the analyst recorded a ”very
high” yield increase of 12 percent YoY in USD-terms in September,
while revenues were up 21.8 percent in USD.
“The only region maintaining a YoY
double-digit volume growth in September was Asia Pacific: +12.3 percent
for outgoing and +11.3 percent for incoming business,” said WorldACD.
“Through the first three quarters
of the year, Asia Pacific (+14.2 percent) and Europe (+12.6 percent) remain
the best performing areas in volume growth, consolidating their top positions
in the world's air cargo business.
“Asia Pacific can add the distinction
that it is also the only area with double-digit yield growth YoY for each
month in the period Jan-Sep. Where did most of the growing volumes go
to? Four destinations account for 30 percent of the growth in 2017: China
East, USA Midwest, Germany, and Japan.”
All of the above has been
reflected in pricing movements—Drewry’s East-West Airfreight
Price Index jumped over 10 cents to $2.68 in September, and the analyst
surmised that October saw further gains.
A reasonable assumption.
Peak Rebound Solid
Multiple sources in Asia reported capacity shortages last months, not
least in hubs such as Hong Kong and Beijing.
With the peak season set to hit full stride,
rates are set to rise further.
“Costs are jumping through the roof
both to Europe and U.S., and space is quite tight at the moment,”
said Paul Tsui, managing director of Hong Kong-based forwarding and logistics
operator Janel Group. “We expect the situation to remain like this
until the end of December and freight rates shall increase further.”
Cathy Roberson, founder and head analyst
at U.S.-based Logistics Trends & Insights, takes a similar line. “Rates
are rising and capacity is tightening and will remain tight throughout
the peak season, thanks primarily to cross-border e-commerce,” she
Projections & B747-8s
“UPS commented on
its recent earnings call that it took delivery this month of two 747-8
aircraft with another on the way this year,” Ms. Roberson said.
“These three aircraft have already
been placed on the Transpacific lane for peak season.
“In addition, UPS noted that when
testing the aircraft, it was packed. So the expectation is that these
three aircraft will be full throughout the holiday season.”
She reported that air freight rates were
currently climbing and added: “The Transpacific will be extra busy
thanks to U.S. consumer demand—consumer spending is up this year
and will remain so thanks to a good U.S. economy.
“Rumor has it that Amazon Prime Air
has consolidated its U.S. cities to focus on heavy volume stations. I’m
not sure what these heavy volume stations are, but I can imagine they
are the usual suspects—NY, Amazon’s air hub in Ohio/KY, and
either LA and/or the Seattle airport.
“The outlook for 2018 will continue
to be tight leading up to the Chinese New Year, which is February 16,”
Cathy Roberson concluded.