Air freight volumes and yields up strongly in November

In mid-December, when the world’s major cargo carriers and airports began reporting their November results, the strong gains led us to predict that when IATA and WorldACD published their worldwide data for the month, we would see air freight demand growth of between 7% and 8%.

Yesterday, WorldACD reported that worldwide cargo volume, measured by chargeable weight, was up 6.9% year-over-year. IATA measures demand by freight-tonne-kilometers flown, and our guess is that IATA will report November FTKs up about 8%.

But a more accurate measure than either chargeable weight or FTKs may be a new metric developed by WorldACD. Acknowledging that neither tonnes carried nor freight-tonne-kilometers flown was a perfect measure of demand growth, the company introduced a new measure – direct tonne kilometers, or DTKs – that it felt did a better job.

DTKs are calculated by multiplying the weight carried by the direct-flight distance between origin and destination. WorldACD says this is a more accurate reflection of demand because it eliminates the inflationary effect on FTKs of routes with intermediate stops. That is, demand for iPhones in Europe is the same whether those phones fly from China to Europe directly, or with a stop in Dubai, but the route via Dubai is over 3,000 kilometers longer, and using DTKs instead of FTKs more accurately reflects this.

Using this new measure, WorldACD found that demand was up 7.1% in October – much closer to the gain in chargeable weight than it has been since the company introduced the new measure. This indicates a smaller shift towards long-haul traffic than in previous months, which WorldACD attributes to a boom in the relative short-haul intra-Asia traffic in November (up15% y-o-y).

Perhaps more important than the increase in traffic was a considerable strengthening of the yield environment. While yields were down on a year-over-year basis, WorldACD points out that the 2016 peak season saw a tremendous boost in yields compared to earlier in the year: “In the main markets from Asia Pacific, between August and November the USD-yield to North America rose by 25%, and to Europe by 30%. Volume increases since the summer were spectacular in markets from Hong Kong (+30%) and Shanghai (+17%), also higher than in previous years.”

A final point of interest in the WorldACD report was that the directional imbalance in air freight flows between Asia and Europe has not only lessened, but in fact has reversed. Since 2010, there has been little growth in volume from Asia to Europe, but volume in the opposite direction — from Europe to Asia, grew 39%. Over the years from 2010 to 2017 Asians have rapidly become richer and are buying more European goods, while the European economy has stagnated.