DEMAND

• Volumes are softening in July. Purchasing Index (PMI) is at the lowest level since Aug 2020 resulting in reduced cargo volumes.
• Demand in June was 3% lower than same period in 2020.
• Consumer inflation (highest since 1982) and economic situation makes the outlook uncertain
• There is a comeback in demand as countries exit lockdowns and we’re heading to traditional peak-season – with potential capacity crunch on Asia outbound.
• E-commerce cargo volumes and China resumption in China factory output is expected to be key drivers or increased demand.

CAPACITY

• Incremental improvement in capacity with gradual return of passenger flights – capacity was up 18% in July vs. same period last year.
• Passenger flight capacity down by nearly -19% in Jul 21 vs Jun 19, and overall capacity in the market is down 10%.
• Capacity in and out of China is increasing with the easing lockdown, reaching 80% of pre-lock down levels in June.
• Further increase in passenger flights is expected as more countries is coming out of Covid lockdowns and travel resumes.
• Russia-Ukraine war is continuing to impact the freight market with airspace closure, esp. on North Asia to Europe routes.

RATES

• Rates show signs of softening but in Jun the rates are still 120% higher than same period in ’19 and 23% higher than 2021 baseline.
• Rates are expected to remain high driven by aggressive yield management by carriers, and hike in fuel prices.
• Airlines continue to manage yields aggressively; where cargo revenue is representing 30% of their revenue – compared to 10-15% in 2019
• Priority uplift and direct services comes at a premium – where lower rates risk not getting uplift.
• Jet fuel prices has increased steadily since April 2020 and came in at 159$ per barrel in July.