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The Dollar Effect Causes Turbulence in Air Cargo Prices

The Chinese New Year and weak dollar both had an impact on global air cargo prices, not to mention shipments in the first quarter of the year, according to a new report from WorldACD.

The worldwide air cargo yield dropped to $1.89 in March, which was 1 percent below February, but 16.3% higher than a year earlier, WorldACD said. As cargo yield represents the average fare paid to transport one ton of freight for one cargo revenue mile, WorldACD noted that the weakness of the dollar from a year ago compared to currencies such as the euro had an effect on the price.

For the first quarter, air cargo yield increased 18.6% when measured in dollar terms, but only 2.7% when expressed in euros. The report noted that when comparing the first quarter of 2018 with the same period in 2017 for currencies of importance to many large air cargo companies, the dollar lost 13 percent against the euro, 11 percent against the British pound, 8 percent against the Chinese yuan and 5 percent against the Japanese yen.

WorldACD said of European versus American carriers on the North Atlantic route, a weak dollar and a strong euro can and did lead to greater flows of incoming business in Europe and outgoing business from North America. This occurred even though for both airline groupings, the larger part of their total North Atlantic business (56 percent) still goes in the westerly direction.

From Europe to North America, the year-on-year increase was 33.8% in dollar terms, but only 15.9% measured in euros. In the other direction, yields increased by 8 percent in dollar terms, but decreased 6.5% in euros.

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“Add to this that jet fuel prices have almost doubled over the past two years and we understand that the recent large yield increase as measured in dollars may take on a different meaning for different parties,” the report noted.

As for year-over-year air cargo performance in the first quarter, World ACD said, “We had to wait until the full effects of Chinese New Year were known, since [it] effects resonate in the air cargo community worldwide.”

Worldwide air cargo volumes increased only 0.9% year-on-year, due in part to the Chinese New Year falling later this year and stretching into March compared to last year, the report noted. Chinese New Year, which usually means about a month of factory closures in China, began on Feb. 16 this year versus Jan. 28 last year. That makes overall first quarter figures are a better parameter of the state of air cargo volumes.

Combining a strong market in January and the more modest growth in February, when Chinese New Year began, volume growth in the first quarter was 4.8% year-to-year. In air cargo exports, Central and South America grew by 12 percent, while volume from Africa fell 3.3%. In incoming volumes, the European market grew 7 percent and the Middle East and South Asia saw 0.6% growth.

Of the top-30 origins in the world, the best performers in the quarter were Turkey, with a 20.6% increase; Japan, with a 17.8% gain, and Ecuador, up 12.2%. Among the world’s largest “country pairs,” the markets from Japan to China East increased 24 percent, Germany to India rose 19.2% and Chile to the U.S. South Atlantic increased 17.6%, while Hong Kong to Germany fell 9.9% and Japan to Taiwan dropped 6.8 among the large country pairs losing ground.