Peak season hopes dashed as Nov numbers slide

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Airlines’ hopes of a peak season boost in November were dashed by a year-on-year fall in demand of 1.0 percentage point. This is the first decline in demand since the road to recovery started six months ago, according to the latest industry statistics from analysts CLIVE Data Services and TAC Index.

From a low of -37 per cent in April, the gap in year-on-year air cargo volumes has been steadily closing in the subsequent months to the end of October, by which time the margin versus 2019 volumes had reduced to ‘only’ -12 per cent. In November, however, the gap rose slightly to -13 per cent as the coronavirus continued to take its toll on global trade and international supply chains, CLIVE notes.

This validates a signal first identified by CLIVE Data Services in the final week of October 2020 when air cargo’s ‘dynamic load factor’ – calculated on both the volume and weight perspectives of cargo flown and capacity available – unexpectedly slipped by 1.5 per cent.

New data for the four weeks ending 29 November shows that capacity – up 3.0 per cent month-on-month – outpaced demand, with chargeable weight increasing by just 2.5 per cent.

Overall, available capacity was 21 per cent less than a year ago. Consequently, despite rising to 72 per cent in the opening two weeks of November, the dynamic load factor reduced to 70 per cent for the second half of the month. Although 5.0 percentage points higher year-on-year, was still below the 8.0 percentage point load factor increase in the month of October 2020.

CLIVE Nov
The ‘peak of all peaks’ did not materialise in November, instead the recovery stalled, with demand sliding one percentage point.

Commenting on November’s market data, Niall van de Wouw, managing director of CLIVE Data Services, says: “We saw a leveling off develop at the end of October which we stated might be indicative of a market which was cooling off a little, and this was indeed the case.

“After six months of small but encouraging improvements, the stalling of demand in November – typically a peak month when we’d expect dynamic load factor growth – could be seen as a further negative indicator.

“However, we must contrast this with the impact of lockdowns and restrictions imposed by governments to slow the second wave of Covid, especially in Europe and the US, and the corresponding disruption to business continuity and consumer confidence. Against this uncertain operating environment, the global air cargo market in November arguably showed a degree of resilience.

But not all is gloom and doom as van de Wouw highlights with the coming vaccine roll-outs. “The air cargo industry can also take some comfort from the positive news of successful vaccine developments and the global demand shipments of the vaccine will hopefully produce for air cargo supply chains. This will also bring more capacity to the market and hopefully coincide with a rise in consumer spending, which is hopefully a prelude to a more sustainable recovery in 2021.”

Looking at major trade lanes, TAC Index reports airfreight rates in November increased significantly from Hong Kong and China to Europe month-over-month by 30 and 24 per cent respectively, although rates from Hong Kong to both Europe and the US flattened towards the end of the month and, week-on-week analyses shows China-Europe rates decreasing by around 6.0 per cent towards the end of November.

Robert Frei, business development director at TAC Index, states: “This is a fluctuating market. The increase in rates is likely to be the result of airlines selling more capacity on the short-term market and forwarders securing air cargo capacity through charter arrangements. Overall, in November, we did not see the rates one would have expected based on earlier anticipation of a strong peak season.”

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