The latest edition of Air Freight Market Update - January/2022.
Contents
Market Overview
Focus
Jet fuel monitor
Global demand & capacity
Trade route analysis
Market Overview
Airfreight traffic has outperformed the global goods trade for nine months. Several factors point to continuing strength for air cargo demand going forward.
Compared to other modes, airfreight has become more expensive but is still below historical levels.
The Drewry East-West Airfreight Price Multiplier vis-a-vis ocean pricing has climbed from a low of 3.2 in August to 6.2 in November.
Growth in demand (industry-wide cargo tonnekilometers) slowed in November after a prolonged period of solid performance. CTKs were 3.7% above their November 2019 levels, rising 8.2% in October versus October 2019.
The softening is somewhat unexpected, as many demand drivers, such as consumption and new export orders, are performing well. However, air cargo is increasingly impacted by supply chain issues, notably with congestion at airports and a lack of capacity where it is most needed.
The deceleration in growth was widespread across the central regions, though not homogeneous. International CTKs in North America, for instance, grew 11.4% compared to November 2021, while they fell by 13.6% in Latin America.
November saw significant difficulties in moving cargo at several vital airports, such as New York’s JFK, Los Angeles, Amsterdam, and other main airports in the world. This was caused by labor shortages – partly related to workers placed in quarantine, insufficient airport storage space, and a large backlog of shipments to process.
While it is difficult to quantify the impact on air cargo volumes carried, congestion is likely to have intensified in November amid the rush to deliver goods for key consumer events at the end of the year. The lack of cargo capacity on some key trade lanes, such as within Asia, prevented all the demand. While there is capacity globally, it is sometimes not available at the right place.
Focus
Jet fuel monitor
Global demand & capacity
November 2021 was a relatively soft month for air cargo, as industry-wide demand (CTKs) grew by 3.7% compared to the same month in 2019. This is down from 8.2% in October on the same basis and the lowest rate since January 2021.
The deterioration is somewhat unexpected, as there are signs that demand remains strong during the peak cargo season. Most of the slowdown in the volumes carried in November can be explained by supply chain issues. After removing seasonal patterns from the data, CTKs dropped by 1.3% month-on-month in November 2021, nevertheless leaving the actual level slightly higher than the pre-crisis August 2018 peak.
Industry-wide capacity (ACTKs) was 7.6% below 2019 levels in November, in line with the October outcome (a 7.4% fall). Although there have been improvements, capacity shortages continue to impact the industry.
Total ACTKs are up 5.9% compared to precrisis levels in North America, but this is an exception, as many other key trade lanes are congested. For example, in November, total ACTKs declined by 15.7% compared to November 2019 in Asia Pacific
Trade route analysis
In Africa, airlines posted marginally positive rates of growth in their international CTKs compared to November 2019, at 0.8%. Traffic has stabilized after a period of strong growth earlier in the year – in the year to October, CTKs in Africa were up a downwardly revised 12.9% against 2019.
South Africa’s economy returned to expansion in November based on PMI surveys, however supply constraints and rising inflation represent a challenge to further improvements.
Carriers in Africa saw RPK (RevenuePassenger-Kilometres) decline at 60.1% in October compared to 2019. Travel restrictions have eased in the region recently, but trends diverge widely in terms of vaccination – less than 10% of Africans had been fully vaccinated at the end of November.
As of December, African airlines are scheduled to receive 27 aircraft deliveries in 2022, up 59% vs. 2021.
Asia Pacific performed relatively well in November, as airlines based in the region posted a 5.2% rise in their international CTKs versus November 2019. This was only marginally below the outcome of October (5.9%), and the region is the only one with seasonally adjusted cargo volumes currently moving up (0.9% month-on-month in November).
RPKs (Revenue-Passenger-Kilometres) of airlines based in Asia Pacific were 66.4% below pre-crisis levels. After a long period without any clear improvements, some tentative signs of a recovery in the region’s international travel have appeared in the past 4-5 months. For example, the Middle EastAsia route is trending up at a consistent pace, driven by the return of traffic flows between India and Gulf countries. Amongst the key domestic markets, India and Japan showed strong RPK improvements (RPKs down 27.0% & 49.3%, respectively vs. 2019).
Airlines based in Asia Pacific saw their cargo volumes rise by 3.6% in October 2021 versus the same month in 2019, following a 0.5% contraction in September. The large Europe-Asia market segment was an important contributor to the above, partly because of the reopening of some international passenger routes. Indeed, belly cargo capacity between Europe and Asia was down only 28.3% 2019 levels in October, compared to 37.9% in September, which is likely to have supported volumes carried.
In Europe, airlines posted marginally positive rates of growth in their international CTKs compared to November 2019, at 0.3%.
Air cargo capacity also improved in October – industry-wide available cargo tonne-kilometres (ACTKs) were 7.2% below October 2019 levels. In September, the fall versus 2019 had been at 8.8%. European airlines posted ACTK fall in line with the industry average, at -7.2%.
Europe was impacted by supply chain congestion and localized capacity constraints, as illustrated by long supplier delivery times and deteriorating capacity on the key EuropeAsia market (down 7.3% versus 2019 in November).
The ongoing material shortages and rising inflationary pressures on both the input and output sides represent a significant challenge to manufacturing growth in the current operating environment.
For European airlines, air cargo growth improved from 6.3% in September to 9.0% in October, when compared with pre-crisis levels. Manufacturing activity is resilient in the region but slowing down, and inflation is increasing, although less than in the US.
As of December 2021, European airlines are scheduled to receive 60% more aircraft deliveries in 2022 vs. 2021. Most of these deliveries will be a narrow-body aircraft (+138 vs. 2021).
There was a 13.6% decline in international CTKs carried by Latin American airlines in November, compared to the same month in 2019. Rates of decline have seesawed for most of the year, partly due to the restructuring process at some of the largest airlines in the region. Those carriers are now progressively emerging from bankruptcy protection, which may reduce volatility moving into 2022.
Latin American airlines posted the sharpest ACTK contraction amongst all regions, at - 22.7% (vs. Oct 2019).
The manufacturing sector contracted in Mexico and Brazil in November amidst rising input costs caused by supply chain disruptions.
Airlines based in Latin America flew 33.6% less RPKs (Revenue-Passenger-Kilometres) vs. pre-crisis period. Vaccination and new infection trends are positive in the region, and the North-Central America routes are one of the top performers globally (down 9.2% in October vs pre-crisis levels).
As of December 2021, Latin American airlines are expected to receive 68 aircraft deliveries in 2022 (vs. 82 in 2021).
Carriers in the Middle East also faced a significant deterioration in their international CTKs, with growth versus pre-crisis levels diminishing from 9.7% in October to 3.4% in November. A downward trend may be starting to emerge in SA volumes, partly driven by the large Middle East-Asia trade route.
The growth in Saudi Arabia’s economic activity eased but remained robust as the country continues to recover from the pandemic effects. Economic expansion accelerated in the UAE, driven by increased business activity around Expo 2020.
Carriers in the Middle East saw RPKs (Revenue-Passenger-Kilometres) decline at 59.0%, in October compared to 2019. Travel restrictions have eased in the region.
Cargo capacity deteriorated in the Middle East in November, where the contraction accelerated by 4.6ppts, to -8.7%.
As of December, Middle Eastern carriers are expected to obtain 62 aircraft deliveries in 2022 – 22% more than in 2021.
In November, carriers based in North America posted an 11.4% increase in international CTKs versus the same month in 2019, down from 20.3% in October. However, seasonally adjusted CTKs declined by 3.3% month-onmonth, and a downward trend in volumes is starting to emerge. Inflation, which reached 6.8% year-on-year in the US in November, is hurting consumers, and congestion issues at several key gateways have added to headwinds for cargo volume.
North American airlines reported ACTKs up 3.1% in November.
Supply delays continued to weigh also on operating conditions in the US although the PMI metric, for now, remains firmly in the territory associated with the expansion of the manufacturing sector.
North American airlines reported a 26.3% decline in their RPKs in October 2021 vs. October 2019. The US lifted a strict travel ban for several countries on November 8th, and Canada also eased international travel restrictions at the end of October. However, any potential boost in the coming months may be short-lived due to the spread of the Omicron variant.
As of December 2021, North American airlines are scheduled to obtain 413 aircraft deliveries in 2022, up 39% vs the previous year.
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