Global demand for air freight services was fairly stable in August, maintaining stability for the fourth consecutive month. However, it is still much higher than the level before the outbreak, an increase of 7.7% compared to August 2019, slightly lower than July (+8.8%). The International Air Transport Association (IATA) recalled that the growth recorded this year also far exceeded the industry's monthly long-term average of 4.7%.
* FTK: Freight ton-kilometer-Data source: IATA
Supply is tight again
After several months of improvement, pressure on production capacity increased again. Supply in August fell 1.6% from July, the biggest contraction since January. Compared with August 2019, the capacity of international routes has dropped by 12.2%, or even by 13.2%.
This phenomenon illustrates the continued vulnerability of air transport in the context of a pandemic. According to the International Air Transport Association, the main reason for the decline was the spread of Delta variants in Asia, which led to the closure of Nanjing Airport and the adoption of very strict quarantine measures in other major airport hubs such as Shanghai or Beijing. The blockade measures decided by Vietnam also affected the supply of air cargo.
In the context of dynamic demand, supply contraction keeps the load rate at an abnormal level. The overall growth rate in August 2021 was 54.2%, which was 10 percentage points higher than in August 2019, setting a record for the same period this year. For Asia-Pacific airlines whose load factor reached 69.8%, an increase of 18.5 percentage points from August 2019, the growth is particularly alarming! This trend is a direct result of the disruption of operations in the Asia-Pacific region, resulting in a 28.1% drop in capacity provided.
Global air freight services prices rise
Although air cargo prices are still high compared to Covid's previous levels, they have experienced a certain calm in recent months. However, the International Air Transport Association said that the tightening of capacity and strong demand once again boosted them in August, "making many industries unable to afford air freight." As the data in our Upply database shows, this is especially true for the Asia-Europe Corridor. A comparison with August 2020 also shows that freight rates within Asia and between Europe and North America have increased significantly.
This trend was confirmed in September, as prices within Asia and the Asia-Europe and Europe/North America corridors continued to rise.
Source: Supply-Note: These estimates are based on actual transactions. As new data is integrated into Upply's database, the changes mentioned may be revised
Peak season heralds record levels
Economic indicators show that demand during the peak season will remain very active, that is, the fourth quarter of the year traditionally marked by a few commercial activities such as a single day or Black Friday, and of course the Christmas period. As this period of high consumer spending approaches, inventories are still relatively low. If the airline manages to open up capacity, this is a favorable factor for air transport.
If capacity has not been booked, it is too late to consider offshore supply. Rail freight was also a victim of its success, and border congestion greatly extended the transit time.
Therefore, the price of Air freight services in the fourth quarter should continue to rise. Globally, according to IATA's latest estimates, airlines expect that in 2021 cargo revenue will reach 175 billion U.S. dollars, an increase of 36% over 2020, and cargo volume will increase by 18.2%. Therefore, the average unit income should reach US$3/kg, compared to US$2.71 in 2020 and US$1.79 in 2019.
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