Air Cargo Load Factors Hits Record High
The International Air transport Association (IATA) is actively tracking the economic status of the aviation industry. A major element of the industry includes the Air Cargo sector which has been the talk of the town for 2020. The latest forecast produced by IATA is anticipating that total air cargo revenue will be up near $111 billion for 2020, which is a massive 25% increase from previous industry totals.
Since the start of passenger airlines cutting routes and putting aircraft to rest the cargo industry has been working around the clock to pick up the volume that is left on the table. What some are referring to as a ‘Capacity Crunch’ is the driving factor that pushed the prices related to air-cargo chartering.
With a thinned out network of commercial airlines operating, cargo airlines have been pushing to maximize their capacity on board for and working with clients that are able to fill their entire aircraft with products to not waste any trips. From the peak record air freight yields that we have seen in late May through to Early June we are starting to see a slow down in the push for space.
As we currently sit in the summer season, gears will need to start switching to prepare for the fall and winter season where we naturally see an increase in activity. With more than 2000 aircraft currently re-entering service, many have made adjustments to remove some seats from the cabin configuration to allow for additional weight to be carried in the belly.
In the chart above we can see how the global air cargo yields have dramatically increased in comparison to the industry wide as a whole. The reason is directly correlated to the decrease in active routes for commercial carriers around the world. As the economy is gaining some sense of stability after the massive shock and surge of demand for personal protection equipment and medical supplies we can start to see capacity levels easing.
With a sharp rally in growth from this year we can see there being a potential for some slow down in demand near the end of summer entering the start of the fall. As we start to get closer to the end of the year where the holidays are and then toward the start of next year, the models are currently showing a strong recovery outlook through 2021. These factors are dependent on a growth in world trade and GDP.
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Connecting small freight with large freighters
Country wide lockdowns and travel restrictions are developing faults in our supply chain world wide. Small links in the system have been interrupted, or potentially even seized completely. With some of only the largest players in the field being able to compete the role the brokers play is vital in the industry.
International Belly cargo has decreased by over 60% as the airlines with large wide body aircraft that used to connect cities together around the world have not been flying their same routes. With cargo still needing to be moved around the world freighter aircraft are now having to pick up the slack from the lack of available flights The obstacle being faced is these large dedicated freighter aircraft often required the requester to purchase the entire aircraft as a whole.
Many small organization do not have the capitol or the means to charter an entire B747 for just a few pallets so they will then reach out to a freight broker to get them the best rate available. Freight brokers work to connect together small loads that would not be able to fill an entire aircraft that have a similar routing with each other as one load on a large dedicated freighter.
This helps reduce the cost for the client as they are now able to get their precious cargo on an overnight flight from the pacific rim to the United States. Allowing them to get goods delivered on time without overpaying for the service. It also helps cargo operators with maximizing the capacity of the aircraft.
Leading Air Cargo Companies
Air Cargo companies have made Anchorage the busiest airport in the world this for 2020! As freight is brought from manufacturing companies from Asian Countries Anchorage has served as the ideal tech-stop for freighters to refuel, swap crews, get fresh catering and continue onward towards their final destination. Many cargo aircraft can fly with full payloads onboard with only needing to make one stop on a lets say a popular route such as Hong Kong to the Los Angeles.
For many years prior, Hartsfield – Jackson Atlanta International Airport held the number 1 spot for worlds busiest airport. Seeing the switch to a cargo aircraft tech-stop shows the dramatic increase in cargo demand and how that is changing the world.
Some of the largest fleets of cargo freighter are operated by a three companies, Atlas Air Worldwide (AAWW), FedEx (FDX), and UPS (UPS). Each of these carriers have been working through this global pandemic to ensure that consumers can have the their goods delivered on time.
Atlas Air Worldwide (AAWW)
Atlas Air Worldwide (AAWW) is currently in an upwards trending channel moving up towards levels that we have need seen since summer of 2019. During the end of 2019 when trade tension was high between China and the U.S. we started to see price drop down dramatically. Price hit a major low when U.S. stocks dropped in equity on the economic shock that came with Covid-19. With implied volatility rising and business looking optimistic, premium is currently rich.
Being range bound and currently testing near the upper ranges we can look to create a define risk set up with an iron condor between the $42 strike and $52 creating a $10 wide range. These kind of trades are best closed prior to expiration to maximize potential profit.
A well known and recognized brand, FedEx has shown to have great resonance with the current range that it is trading within. We can see the correlation to the previous year how price was trending sideways between major support and resistance level for month at a time. The most recent earnings release for Q2 2020 showed a loss although we can see price spike up days prior in optimism for the company.
We are looking at the sideways trending movement that has a high probability of repeating for setting up Iron Condor trades as well. These strategies help define risk and reward to create for a high probability trade. Considering that FDX has greater trading volume we are going to widen the spread for $20 looking at selling the $170 call and selling the $150 put. Depending on your risk to reward projections the long call and put may vary on your strategy.
UPS reported a profitable quarter for Q1 2020 with EPS at 1.11 after having a forecast of 1.24. For Q2 2020 they have set their forecast for 1.08 and we can expect to see results in this coming month. During the summer month we often start to see a slow down in trading volume as market start to thin out with more families on vacation. Considering this year may be slightly different with less families flying for vacation this comes back to our discussion regarding capacity of belly and freighter. With commercial fleets not operating the same routes this summer UPS may be filling in those empty routes.
With the market pulling up in a rapid manner we do not want to trade against the momentum of the speed of the market. Considering buying long calls would be a depreciating asset there is a probability that our option would expire worthless. So we are going to play the contrarian and look to sell some out of the money put credit spreads. For example selling a $110 Put and buying the $110 put would bring in a net credit of $1.73 a contract. With a 62% probability for the short put to expire worthless on expiration it is important to ask yourself what trade parameters your are comfortable trading with.
Training and investing actively in the market is a career and profession in it of its own. Just like any other skill in life that is worth getting good at, having a great foundation builds success. Don’t have the time or resources to enroll in a training course or program? We have designed a straight-forward easy to use system to enable new investors to earn while they learn.
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Freight Brokers provide an incredible service to the industry. The help reduce wasted space and maximize savings for their clients. As freight brokers help shippers move from point A to point B by connecting them with freighters they sit in as a middle man to help facilitate a smooth transportation. Many freight brokers earn a profit between 10%- 35% of profit per shipment.
That means brokers typically earn between $100 to $500 per shipments but I have earned as much as $5,175 per shipment just for finding a truck to haul our customer’s freight!
Now the only question is how many loads do you think you can you move per day… 1, 2, 10 or more? Before we get to that.
Why become a freight broker?
- No experience is necessary to get started!
- Be a part to a $400 billion industry that is growing!
- Run your business from home!
- Very low start up cost!
- Huge income potential!
- Brokering doesn’t require employees!
- Do business anywhere in the U.S. Canada or even International!
- Easy to relocate, all you need is phone, internet and KNOW HOW!
- You can always sell your business or pass it on to your family!
- Easy and profitable add on to existing trucking operations!
- And much more…
No special background is required to become a freight broker. With the proper determination and training almost anyone can become a freight broker. Email us at Info@airmarketgroup.com to learn more about how to start your freight broker training today.
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Air Market Group content is provided solely by Air Market Group LLC and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, transaction, or investment strategy is suitable for any person. Trading securities can involve high risk and the loss of any funds invested. Air Market Group, through its content, financial programming, or otherwise, does not provide investment or financial advice or make investment recommendations. Investment information provided may not be appropriate for all investors and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon, or risk tolerance. Air Market Group is not in the business of transacting securities trades, nor does it direct client commodity accounts or give commodity trading advice tailored to any particular client’s situation or investment objectives. Supporting documentation for any claims (including claims made on behalf of options programs), comparison, statistics, or other technical data, if applicable, will be supplied upon request. Multi-leg option strategies incur higher transaction costs as they involve multiple commission charges. Air Market Group is not a licensed financial advisor, registered investment advisor, or registered broker-dealer. Options involve risk and are not suitable for all investors. Please read the Characteristics and Risks of Standardized Options before deciding to invest in options.
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