CLIVE says traditional ‘slack season’ short-lived in July

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Global airlines managed the traditional summer slack season for air cargo space in July by constantly tweaking capacity levels to address flat demand during the month versus pre-Covid levels, says CLIVE Data Services and TAC Index.

New industry volume, load factor and rates data from the two industry analysts also highlight airfreight rates lagging two weeks behind changes in the demand/supply ratio.  Chargeable weight was flat in July versus 2019 and +23% over 2020.

In order to provide meaningful analyses of the current state of the global air cargo market, CLIVE continues to measure performance to pre-Covid 2019 levels as well as providing 2020 year-over-year comparisons to 2021.

Capacity, however, remains tightly constrained with available capacity up 29 per cent compared to 2020, is still 18 per cent below the level seen in 2019 before the pandemic took hold. As a result, CLIVE observed a fluctuating dynamic load factor in July.

Reduced capacity contributed to the 5.0 percentage point rise in dynamic load factor versus 2019 – measured against both the volume and weight perspectives of cargo flown and capacity available – but a 3.0 percentage point drop over the same month in 2020.

Clive data TAC index JULY

“The dynamic load factor for July of 66 per cent is the lowest we have seen since the start of the COVID crisis,” says Niall van de Wouw, CLIVE’s managing director. “The difference compared to 2019 is also 2-4 percentage points lower than in recent months.

“The start of the holiday season and its traditional impact on air cargo volumes is obviously a factor, but it’s also clear that airlines are constantly tweaking capacity. Demand has not picked up yet, so they are tightly managing supply.

“Compared to where the market was a year ago, performance on a par with July 2019 is certainly not bad news, but the demand vs. supply ratio is going to remain tight, especially with no signals that the inter-continental passenger market is going to recover anytime soon.

Van de Wouw notes that a deeper dive into the data reveals that this figure of 66 per cent was mainly caused by low load factors at the start of the month, while, in the last week of July, it rose to 68 per cent and this continued in the first week of August.

“So, if those early weeks were the ‘slack season,’ the load factor was still at a relatively high level and any summer slump was short-lived – but this has to be seen against the backdrop of current capacity trends in the market. The rise in load factor during the last two weeks of July was mainly caused by capacity being taken out of the market based on less strong air freight demand, as we have reported previously,” he says.

CLIVE’s dynamic load factor data and the latest airfreight rates analyses from TAC Index indicates a 1-2 week delay in rates being adjusted to industry load factors.

The BAI (Baltic Air Freight Indices) monthly average increased by 2.0 per cent in July over June but was 6.0 per ent below the year-to-date high seen in May. TAC Index saw week-on-week reductions in the final two weeks of July, which followed the drop in load factor at the start of the month.

TAC reports 13 of its 17 trade lane indexes saw an increase over June 2021. The overall index was positive versus July last year at +38 per cent and versus 2019 by +98 per cent, reflecting both demand and constraints in capacity.

The China and Hong Kong markets saw an improvement in July over June, up 2.0 and 5.0 per cent respectively, after large declines in June. All the trade lanes from these markets were positive over June.

The European market also improved versus June, with average rates up 2.0 per cent ex Heathrow and Frankfurt for July, for example, although the growth versus 2019 differed significantly, with Frankfurt +62 per cent and Heathrow up a staggering 202 per cent.

“Demand continues to be strong in the airfreight industry versus 2020 as economies recover, eCommerce continues to thrive, and the sea freight industry continues to suffer from capacity and operational challenges,” says Gareth Sinclair of TAC Index.

In summary, air freight market prices were up in July but did not recover back to the highs seen in May. Prices continue to be strong versus last year and pre-pandemic levels and this is expected to be the case for the foreseeable future as demand continues to outstrip supply.”


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