2July reinforces trend - A historic market revisited

A crisis in air cargo? For July, we recorded a year-over-year revenue growth (USD) of almost 9% (!), so one could be forgiven thinking for a moment that the industry is healthy as can be. Of course, structural problems continue to trouble the sector, making rejoicing premature. But in a harsh business environment, who wouldn’t be pleased with the market growth in 2014 so far...

Worldwide volume in July increased 6% YoY, accompanied by a USD-yield improvement of 2.9%. The USD-yield remained stable for the third month in a row, another phenomenon not seen for quite a while. Of the total volume-growth in July, 2/3 came from the Asia Pacific area, once again the engine for growth. The markets between Asia Pacific and North America showed a 25% revenue growth (both directions together). Europe remained true to its recent past: its outbound business again showed much less volume growth than the worldwide average, but a higher yield growth (+6% in USD, +2.4% in EUR). In inbound traffic, the three largest markets continued to do better than the three smaller markets of Africa, Latin America and the Middle East & South Asia (MESA).

Given the interest in Asia Pacific and MESA over the past years, we tend to overlook what happens in one of the historic air cargo markets: the North Atlantic. Let’s take stock.

The North Atlantic still ranks among the three largest intercontinental markets. Its growth since 2012 is in line with the other main markets, albeit that the YoY volume growth in 2014 is somewhat lagging behind. Whilst Asia Pacific – North America and Asia Pacific – Europe show a continuing yield decline since 2012, the North Atlantic seems to stop the rot in 2014 (in USD-terms at least…).

The imbalance is slightly decreasing: outbound Europe accounted for 55.7% of the total in 2012 and 2013, in 2014 so far for 54.7%. Over the same period, however, yield differences between westbound and eastbound cargo increased, causing the revenue gap to grow. Perishables and pharmaceuticals show opposing patterns. Perishables increase westbound and contract eastbound, whilst pharma is stable as a % of total volume, whilst attracting a yield premium growing every year.

Of the top-20 individual markets, the fastest growing ones are mainly eastbound (CHI-FRA, CHI-BRU, LAX-AMS and ATL-FRA); the top westbound growth in this group is for LON-LAX. The fastest growing from the top-50 city pairs, are FRA-BOS, ATL-MUC, DFW-FRA, CHI-MIL and NYC-BRU. Maybe not surprisingly, given their provenance, forwarders from the world’s Top-20 have a larger share in the North Atlantic business from Europe than from North America: 64% vs. 61%.

Lastly, do we see a modal shift on the North Atlantic? It seems that air tons as a percentage of air & sea tons increased from 2008 to 2010, declined in 2011 and have been fairly stable since, hovering between 0.94 % and 0.99 %. For all commodities with an air share of 10% or more, the figures for the last three years are equally stable with an air share between 24.5% and 25.5%. The picture is radically different in pharmaceuticals, the air % dropping from 43 to 32 over the past three years, though actual tons carried are growing in both transport modes. WorldACD stats make it clear that high-yield pharma by air continues to outpace air growth in general.