September yields surge, volume growth remains strong

Two weeks ago, we predicted that when worldwide data were available for September, we would see a year-over-year increase in air freight demand within a low-double digit band. Both WorldACD and IATA have published their September analyses, and, as you can see in the charts at right, demand was slightly lower than our expectations with IATA reporting demand growth up 9.2% y-o-y and WorldACD up 8.8% y-o-y. Based on these results, we conclude that the larger airports and carriers we track on a monthly basis slightly outperformed the general air cargo market.

Although this was the first month since before the summer when demand growth dipped below 10%, it was not completely unexpected. Looking back at 2016, air freight demand growth was negative at the beginning of the year, 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 up 8.2%, 6.8%, and 9.8% in October, November, and December, respectively. This of course meant that annual comparisons would inevitably become increasingly difficult beginning in September 2017, a trend which will likely continue.

Still, growth of 9% in September is great news; year-over-year gains have now been above 5% for thirteen consecutive months. Aside from the strong results in September 2016, WorldACD offered a few other plausible explanations for why growth was a bit slower in September:

• In 2017, the month of September had “less of the traditionally strong cargo days” than compared to the same month in 2016.
• The hurricanes had a notable influence on North American volumes, particularly in the Atlantic South, and Caribbean. As a result, volumes from the origin North America grew at only 5.6% y-o-y, in September, well-below the industry average.

These influences suggest that the industry has not necessarily “passed a cyclical growth peak” as IATA indicated in its monthly analysis, but rather that double-digit year-over-year growth may be coming to an end. However, strong demand and healthy yields will likely continue despite the tougher y-o-y comparisons.

Speaking of yields, WorldACD reported dollar yields rose 12% y-o-y in September, as USD revenues grew 21.8%. Much of this gain was erased by higher fuel prices, which rose 13% during the same period, but even so, yields have improved.

So, as we proceed through the last three months of 2017, the year-over-year comparisons will be increasingly tough, and even if demand continues to be strong, the y-o-y percentage gains will be smaller.

October data will begin to show up in the next few days, and while we don’t expect to see a huge drop-off in year-over-year growth, we do expect to see the continuation of a gradual decline. And then, by year-end and early 2018, the year-over-year data will be more indicative of long-term growth patterns.