2016 on its way: hard to imagine a more difficult take-off, but India’s start may offer hope
Recent headlines in trade magazines make for fairly grim reading: China reports unexpectedly deep export slump in January - export declines point to a significant deterioration in global trade – cargo losses mount – the air cargo business has never been so tough – air cargo needs to adjust to the “new normal of lower growth”. Coupled with the gloomy general economic forecasts and recent stock market movements, it sure looks as if 2016 is off to a pretty bad start in air cargo.
The first month of the year indeed gave little cause for cheer: year-on-year (YoY) January showed a volume increase worldwide of no more than 0.3%. Europe was the exception, just as it was in the second half of last year, with volume growth of more than 5% outbound and 1.5% inbound. Although Asia Pacific as a region hardly grew, its business to and from Europe thrived (+8.8% resp. +10.6%).
Whilst yields normally drop between December and January, this year’s MoM decrease of 6.6% (in USD) was slightly smaller than last year’s. The January USD-yield drop was 16% YoY, a figure not compensated for by lower jet fuel prices, even though these prices decreased by around 30% YoY. Only Central & South America managed to generate the same yield YoY.
Since an advisor to the Indian government stated last week that the country expects its air cargo industry to grow by over 180% in the next 15 years, this is a good moment to see where India stands. Its growth percentages for the year 2015 are more than double the worldwide average: +4.1% outbound, +4.7% inbound. And for January 2016 the YoY volume growth is even higher: 4.4% and 7% respectively. With yields (in USD) moving along with the worldwide changes, one could say that its starting point is good.
The United Kingdom is still the most important outbound market, but its dominant position is dwindling. The top inbound markets of Hong Kong, Germany and China East strengthen their position with double digit growth figures: the latter two even managed over 20% YoY growth in January. Importantly, there is a good overall balance between India outbound and inbound.
Outbound business through GSA’s grew in line with the market in 2015, but increased spectacularly in the markets to the Middle East and South Asia. The top-5 GSA’s increased their market share (among GSA’s) from 60% to 70%, the top-10 from 80% to 90%, making life more difficult for the smaller GSA’s operating in India.
The same could not be said for India’s top forwarders. Their market share was already smaller in India than worldwide, and it decreased further in 2015. Whereas the top-5 forwarders only lost 0.1%, their share going from 14.6% to 14.5%, the five next biggest forwarders lost a larger part of the market, as their share went down from 10.5% to 9.9%. Airlines could take some consolation from the fact that yields realized through the top-10 held up better than the yields from the smaller forwarders. With the exception of UPS SCS, the global forwarders fared less well than the large regional and local forwarders, who showed spectacular volume growth.