Air freight yields have seen a meaningful increase in April – on the back of capacity constraints
Q2 volume declines in the range of 15-25% year over year
April volumes at top airports/ports indicated average declines of 20%/12% while May preliminary data is broadly aligned. In June, we expect the reopening of economies post lockdown to contribute to a deceleration of the pace of declines. We note air freight volumes recovery is likely to remain constrained by limited capacity (25% lower freight capacity year over year).
Gross Profit per unit of volume (GP/unit) could peak in Q2; lower conversion rates
We believe Q2 Air GP/Unit could further improve quarter over quarter, for most forwarders, to reflect the shift from a contract market to a spot/charter market that favours freight forwarders profitability. Recently air rates are coming down from peak levels while still remaining at elevated levels. Despite depressed volumes and lower fuel costs, ocean rates are higher year over year on several main trade-lanes. With higher discipline among ocean carriers in 2Q we see limited scope for GP/unit quarter over quarter improvements. With meaningful initiatives to address the cost base limited so far we expect most players will see downwards pressures on conversion rates in Q2 quarter over quarter.