September first look: annual comparisons still looking strong

Based on monthly statistics from Pactl, y-o-y demand growth shows no sign of a slowdown.

Monthly annual comparisons for air cargo demand have been kind in 2017, with y-o-y demand growth nearing or surpassing double-digit figures nearly every month of this year. Based on historical demand growth, Cargo Facts expected that y-o-y monthly comparisons for September 2017 might reveal the beginning of a gradual decline to lower growth, but with preliminary results now in from a few of the world’s leading cargo airports and airlines, it appears that robust growth may continue.

First, Shanghai Pudong International Airport Cargo Terminal Co Ltd (Pactl, the biggest handler at Shanghai’s Pudong Airport) reported its September handle up 15.9% to 166,000 tonnes, the terminals best month on record. International volume for the month was up 17.7% to 157,000 tonnes, while the much smaller domestic volume was down 7.4% to 10,000 tonnes (most of Shanghai’s domestic cargo moves through nearby Hongqiao Airport). For the first nine months of 2017, Pactl’s handle was up 13.0% to 1.36 billion tonnes.

Pactl started the year strong, with a 12.3% y-o-y increase for the combined January/February period, and stayed in double digits with an 11.4% jump in March tonnage. April saw a bit of a fall-off, with growth dropping to 9.6% over April 2016. This was part of a worldwide trend of slowing (though still strong) growth in April, and we wondered if it was the beginning of a return to slower growth for the rest of the year. But year-over-year jumps of 13.0% in May and 13.8% in June made it clear that cargo volume in Shanghai was still growing at a pace we have not seen for many years. Growth of 15.9% y-o-y in September is Pactl’s best monthly result yet, (if January/February are combined to account for the disruption from Chinese New Year).

Based on Pactl’s September results, it appears the pace of growth is accelerating, which, based on historical growth, is somewhat surprising. Looking back at 2016, air freight demand growth was negative at the beginning of the year, before turning positive in April, with low single-digit year-over-year gains through August. But in September, growth began to accelerate, up 6.1% in that month, and then 8.2%, 6.8%, and 9.8% in October, November, and December, respectively. So, as we proceed through the last four months of 2017, the year-over-year comparisons will be increasingly tough, and even if demand continues to be strong, the percentage gains will be smaller.

Or perhaps not.

In addition to generally favorable economic conditions and stable jet fuel prices that may be providing a boost to global air cargo demand, there exist multiple disruptive forces with an impact that is difficult to quantify in the near-term. First, significant volumes of aid and supplies have been airlifted to islands in the Caribbean devastated by hurricane’s Harvey, Irma, and Maria. This will certainly boost air cargo traffic moving into the Caribbean from North and South America for the remainder of the year. Separately, a decision by Saudi Arabia and its allies to impose a blockade on exports to Qatar, has caused shippers to shift many goods which traditionally traveled by sea to air freight.

Whether the growth at Pactl in September is a reliable indicator of air cargo growth worldwide remains to be seen, but it does look as if strong growth will finish out the third quarter of 2017.

Most carriers have yet to publish traffic figures for the month of September. One exception is Atlanta-based Delta Air Lines, which reported September cargo traffic up 9.4% y-o-y to 273 million RTKs, the seventh consecutive monthly y-o-y gain after years of declining demand. This brings Delta’s cargo traffic for the year to 2.35 billion RTKs, up 9.2% over the first nine months of 2016.

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