Global volumes hit pre-Covid levels in only 10 months

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A robust global air cargo market has virtually made a full recovery to pre-Covid volume levels inside 10 months, according to CLIVE Data Services and TAC Index.

The two industry analysts reached this conclusion based on airline performance data for February 2021. For the four weeks of February, chargeable weight stood at just -1.0 per cent compared to February 2019 and was 2.0 per cent ahead of the same month of 2020.

Niall van de Wouw, managing director of CLIVE Data Services says airline passenger departments can only be “dreaming of such a recovery in passenger demand.”

Clive Data Feb '21

CLIVE Data Services says that in order to give a meaningful perspective of the industry’s performance, it will focus on market data comparing the current state of the industry in the context of 2019 volume, capacity and load factor developments until at least Q3 of this year. This will be produced alongside the 2020 comparison.

Capacity in February 2021 was -8.0 per cent and -5.0 per cent versus 2019 and 2020 levels respectively, while CLIVE’s ‘dynamic loadfactor’ – calculated on both the volume and weight perspectives of cargo flown and capacity available – was up +5.0 percentage points on February 2019 and +9.0 percentage points on the same month of last year.

The overall dynamic load factor of 69 per cent was at the same level as January 2021 while month-on-month volumes climbed 7.0 per cent, despite February being three days shorter than January, as capacity rose 5.0 per cent over January.

“These are tricky months to compare due to the Chinese New Year and Leap Year variances, so we have to be careful in how we read the market,” cautions van de Wouw.

“To give a meaningful view, it makes sense to keep an eye out to 2019 before the pandemic took hold and, on that basis, air cargo demand is now nearly at par with pre-Covid volumes despite much less capacity in the market.

“If we normalise for last year’s Leap Year, we can see a 2.0 per cent growth in global volumes compared to February 2020 but that does not tell the tale by any measure – the apparently modest global growth number is masking what lies underneath,” he highlights.

Volumes from China to Europe, for example, were nearly 5x higher in the four weeks of February 2021 than in the similar weeks in 2020, van de Wouw says. This was caused by the dramatic drop in volumes because of the factory closures a year ago in response to the COVID outbreak. Volumes from Europe were down by -11 per cent for the same period, he notes.

“Demand is increasing and there are a lot of passenger planes sitting around that could start flying cargo, but I don’t think that will happen proactively. Given the high financial risks, when it comes to adding capacity, airlines are more likely to follow the market as opposed to trying to stimulate it.

“But, if it makes sense, they will surely fly those aircraft. Air cargo has been resilient and, bit-by-bit has clawed back the losses we saw only a few months ago.”

In April 2020, volumes were down -39 per cent but are now back to the pre-Covid level. “Who would have thought that possible inside 10 months? It’s a recovery airline passenger departments will be dreaming of,” he adds.

The volume, capacity, and load factors continue to be reflected in higher prices, TAC Index says. Robert Frei, business development director at TAC Index, comments: “Volatility remains high (also intra-month) and, given the much higher pricing levels than a year ago, is having a major impact.”

He points to PVG-EUR, as an example. “If you are 10 per cent off with your procurement today (which would be CNY 3.20) compared to 2020 levels, it would have meant a deviation of 18 per cent.

“This presents a very risky environment for freight forwarders and potentially an immediate loss on their gross margins of 8-10 per cent. So up-to-date pricing information on a weekly basis is an absolute necessity to manage these volatile periods. We also assume the spread of spot rates is likely to remain high,” Frei adds.

The latest data from TAC Index shows that while the monthly pricing average seems ‘mundane’, weekly rate levels reveal substantial volatility.

TAC Index says the Baltic Exchange Index in February was +2 per cent over January, taking into account Chinese New Year starting 12 February, which is normally considered peak season. But when looking at the CNY impact on the PVG-EUR lane, compared to previous years, in the two weeks prior/post CNY, TAC Index observed:

  • 2019 – overall period +8.0 per cent;
  • 2020 – overall period -4.0 per cent;
  • 2021 – overall period -13 per cent.

TAC Index also notes that February 2021 saw the largest drop in yield, compared to the last two years, during the four weeks around CNY. In absolute terms this period compares as follows:

  • 2019 – average CNY 20/kg;
  • 2020 – average CNY 17.5/kg = -11.0 per cent to previous year;
  • 2021 – average CNY 31/kg = +79 per cent to previous year or +63 per cent higher than 2019.

TAC Index adds that interesting observations can also be made when comparing PVG with HKG. On the HKG-EUR lane, rates were flat compared to PVG-EUR – which increased by +7.0 per cent. HKG-USA rates went up +2.0 per cent, while PVG-USA prices dropped by -1.0 per cent.

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