Changing market dynamics: can airlines and GSA's strike the right balance?

August 2013: some positive news at last, as the months-long yield slide was halted. Worldwide yield in USD rose by 1.3% compared to the previous month. The volume growth of July, however, could hardly be maintained. Volume increased by only 0.6% Y-o-Y. The MESA-area, having recorded a Double-Plus (i.e. year on year growth in both USD-yield and volume) for the first six months of the year, leaves this distinction to Europe for the second month in a row. The volume growth ex Europe went to carriers from the Middle East and North America mainly.

Lately, we hear a lot of talk about average yields that will drop further in the remainder of the year, due to a combination of stagnant demand and ‘unwanted’ additional capacity flooding the market via passenger aircraft growth. Will this be the case everywhere, or can we find some light in the darkness? Is this the moment for GSA’s to come to the fore?

Comparing Jan-Aug 2013 with the same period last year, we find some clues to possible answers.

The Top-1000 country-pairs account for almost 80% of world air cargo volume: half of these markets showed volume growth, 300 of them even more than 10% each. Some examples: HKG-India 12%, Italy-Japan 18%, Germany-Brazil 20%, UAE-Germany 49%, China Northeast – Germany 15%. Apparently, Germany does more than just exporting goods… These 300 country pairs account for 18% of total worldwide volume, corroborating what we reported before, i.e. that the traditionally smaller markets keep showing growth spurts.

Yields in most top markets continue to decline. Only 18 of the largest 100 O&D’s showed a yield increase. Notable are the markets from the Netherlands to China East (+10.3%) and from the UK to Singapore (+5.1%). An exceptional case is the market between Germany and China East combining big yield improvements with even larger volume increases, both ways!

Talking about balance: the sum of all regional imbalances decreased by 4%, a bit of good news for the airlines. MESA outscored the other areas, decreasing its imbalance to 42:58

Discussions about outsourcing sales functions usually become more animated when the going gets tough. A recession showing only limited signs of recovery, combined with the rise of smaller markets, makes us wonder whether GSA’s are increasing their business, and – if so - what the consequences may be. In the coming months, WorldACD will do research on this subject.

To whet your appetite, we looked at two large GSA’s in the market ex Europe. The first tentative findings show the two together increasing their volume by 10% Y-o-Y, against 1% growth for airlines doing their own sales. The flip side of this strong showing? One should of course be cautious comparing yield averages, but our first impression is that the absolute levels of GSA-generated yields could well be below what airlines’ own sales forces realize. Whilst GSA’s may feel that airlines become more demanding, the question will be whether they can deliver better overall value. Outsourcing, after all, is a matter of two potentially conflicting elements: saving cost whilst maintaining sales (price) levels.