The global air cargo market maintained its "slow, six-month road to recovery" in October but the industry will be waiting cautiously to see if a sudden fall in demand in the last week of the month signals a new hiatus in consumer spending amidst uncertainties caused by the second wave of coronavirus.

Industry analysts CLIVE Data Services and TAC Index said the latest weekly and monthly data for October showed a "sustained improvement" in volumes and rates, and a record ‘dynamic load factor’ — based on both the volume and weight perspectives of cargo flown and capacity available — of 72% in the week of October 19-25. 

It said the latest result further reduced the year-on-year decline in volumes to just -13% versus October 2019 from a peak of -37% at the start of the second quarter.

2nd COVID wave concerns

However, CLIVE and TAC Index noted that the 3% month-on-month growth in volumes for the last four weeks of October, and double-digit rate increases year-on-year, may start to level out if consumer concerns over public health and job security result in them ‘keeping their wallets closed’ and lower demand for air cargo capacity.

“At a high level, the air cargo market can look at October’s performance data and feel reassured the recovery back to pre-Covid levels is continuing. However, there will also be some companies looking over their shoulders at the 3% drop in demand in the last week of the month and wondering if the uncertainties caused by the second wave of the virus are about to stop that recovery in its tracks," said Niall van de Wouw, managing director of CLIVE Data Services.

"We will know more once we see the November numbers but the 1.5% drop in the dynamic load factor in the usually strong last week of the month is unusual and raises question marks over demand in the coming weeks," he added.

Peak may not be as strong

van de Wouw noted that despite the "sustained recovery" exhibited in October, there will be risks as the industry awaits how the second round of lockdowns impacted volumes anew.

"What we may be seeing is a fall in demand at the end of last month which coincides with government lockdown measures in some countries to curb the second wave of coronavirus. While the dynamic load factor and air freight rates for the month were higher, this was less built upon demand and more upon low supply with the -26% annual decline in capacity," he said.

"Perhaps this final week of October indicates that the peak might not be as strong as the industry had envisaged and hoped for," van de Wouw added.  

CLIVE and TAC Index noted that airlines are continuing to flex cargo capacity in accordance with demand — and to compensate for the dramatic loss of passenger traffic.

"Westbound capacity from China reflected this with a double-digit reduction in the last week of October, meaning capacity remained tight from China to Europe and, despite the 5% fall in volumes, prices remained elevated," said Robert Frei, Business Development

Director at TAC Index.

"Airfreight prices for China/Hong Kong-EU increased 9% week-over-week in the last week of October and were 25% higher than in the final week of September. In absolute terms, rate levels were 60% up compared to the previous 2020 high in May," he added.

The TAC Index official said this is also true for China/Hong Kong-US traffic, where rates for the last week of October were up 28% over the same seven days of the previous month.

"Clearly, the industry will be monitoring the demand cycle very closely as we potentially enter into another period of uncertainty," he added.