- The decline in industry wide cargo tonne kilometres (CTKs) accelerated in April, to 27.7% year-on-year versus 14.7% in March. This was due to subdued demand together with the disruption in manufacturing activity as COVID-19 reached all regions of the world.
- Industry-wide cargo capacity declined by 42.0% annually, stemming from the evaporation of the belly capacity of passenger aircraft. Airlines raised freighters capacity – notably by converting passenger aircraft into freighters – to meet demand. The capacity crunch is however likely to have led to some pent-up demand for air cargo. This drove the cargo load factor up 11.5ppts year-on-year in April to an all-time high level since the start of our series in 1990.
- The acceleration in the pace of decline in international CTKs was widespread across all the regions in April, with North America being the most resilient region, and Latin America the most impacted.
The fall in cargo volumes accelerated in April…
With COVID-19 having reached most regions of the world, lockdowns and travel restrictions were widespread in April 2020. This has depressed manufacturing activity and goods demand as well as affected cargo capacity. As a result, industry-wide cargo tonne kilometres (CTKs) contracted 27.7% year-on-year. This is the sharpest fall in the history of our industry-wide series started in 1990, worse than declines seen during the Global Financial Crisis (e.g. 23.9% in January 2009).
In seasonally adjusted (SA) terms, industry-wide CTKs experienced a large monthly decline (-17.6%), after a moderate fall in March (-3.0%). This has brought air cargo volumes back to levels last seen during the post GFC rebound at the end of 2009 (Chart 1).
Chart 1: CTK levels, actual and seasonally adjusted
All the regions we track contributed to the decline in air cargo demand. Airlines in Asia Pacific were the largest contributors to the year-on-year fall, followed by airlines in Europe and the Middle East.
…amidst generally deteriorating drivers in April
In April, extensive lockdowns and stay-at-home orders in most of the world kept manufacturing activity at low levels. The global manufacturing Purchasing Managers’ Index (PMI) dived to levels last seen in early 2009 – after briefly improving in March – driven by the EU and Japan indices among others.
On the brighter side, the US PMI lifted off the bottom in May, and the China index trended in values consistent with expanding manufacturing output (in month-onmonth terms) for the second consecutive month (Chart 2).
Chart 2: Manufacturing output component of PMI
Policies aiming at battling COVID-19 have also caused delays in the transportation and treatment of shipments. As indicated by the supplier delivery times component of the Manufacturing PMI – in which a value below 50 means longer delivery times – those delays increased in key exporting economies in April, except for China. Early PMI indicators for May hints that increases in delivery times are decelerating in some economies (Chart 3).
Chart 3: Supplier delivery times (monthly data from manufacturing PMIs, selected countries)
In normal times, this would be consistent with improving air cargo demand. But the current lack of air cargo capacity prevents that demand from materializing, and instead leads to elevated air cargo rates and load factors.
New export orders remained largely muted in April, with the corresponding PMIs registering sharp declines that month, including in China. Early PMIs for May suggest new orders are bouncing along the bottom (Chart 4).
Chart 4: CTK demand heat-map (monthly data from manufacturing PMIs, selected countries)
Load factors rise to record levels as capacity tumbles
With the evaporation of passenger flights in most regions of the globe, industry-wide available cargo tonne kilometres (ACTKs) dropped an even 42% yearon-year in April. There were large regional variations, partly depending on the possibility to raise freighter capacity. North America was the most resilient region (-26% annually) and Latin America the most impacted (-65%).
The industry-wide cargo load factor (CLF) rose a sizeable 11.5ppts annually in April, the largest increase in our series started in 1990. The magnitude of the climb suggests that there is significant pent-up demand for air cargo, which cannot be met because of the capacity crunch. This unusual supply-demand balance pushed the CLF to an all-time high record for any month (Chart 5).
Chart 5: International cargo load factors by region
International CTK decline worsens in all major regions
Total international CTKs contracted by 29.5% yearon-year in April, an acceleration from the 15.1% fall registered in March. While no regions were left unharmed, there was some large differences across the regions, partly because of differences in travel ban policies, pent-up demand and availability of dedicated freighters (Chart 6).
Chart 6: International CTK growth
Belly vs freighter traffic divergence accentuates
With passenger traffic slowing to a trickle in April due to flight cancellations, the international cargo capacity going into the belly of passenger aircraft fell by roughly 75% annually in April.
Lockdowns, falling consumer income and the loss of manufacturing output undoubtedly mean that demand for air cargo was subdued that month. Belly capacity was however not sufficient to reach demand, forcing airlines to turn to dedicated freighters (up 15%, Chart 7). This also led cargo load factors, rates and yields to rise significantly, sometimes to record levels.
Chart 7: International belly cargo and freighter capacity growth