Air freight markets in for a tough few months, IATA warns

Air freight markets in for a tough few months, IATA warns

HONG KONG — Prepare for a rough ride in the last quarter, was the warning from the International Air Transport Association (IATA) as it released data for global air freight markets in July that as expected revealed a fall in air cargo demand amid turmoil in the world economy.

Although air freight volumes measured in freight tonne kilometers (called FTKs) recorded a fall of just 0.6 percent, the decline was broad-based across all regions with the exception of Africa and the Middle East. The most pronounced falls were in the Americas, where international FTK volumes were down more than 5 percent compared to July 2014.
 
“The recent stock-market turmoil shows that investors have real fears about the strength of the global economy,” said Tony Tyler, IATA’s director general and CEO. “And the disappointing July freight performance is symptomatic of a broader slowdown in economic growth.

“The combination of China’s continued shift towards domestic markets, wider weakness in emerging markets, and slowing global trade indicates that it will continue to be a rough ride for air cargo in the months to come.”

Data from all air cargo associations and analysts in July echoed IATA’s findings. Netherlands-based World ACD Market Data said July growth and revenue was the lowest so far this year, while Drewry's Air Freight Price Index revealed air freight rates on major east-west trades in July were 12 percent below where they were at this time last year.

The Association of Asia Pacific Airlines said air cargo demand among Asian carriers weakened in July as demand for exports fell along with global trade. Traffic figures for the AAPA members showed that air freight markets softened during the month, with demand measured in freight tonne kilometre (FTK) terms registering a 2.2 percent decline compared to the same month last year.

According to IATA data, Asia-Pacific carriers saw a fall in cargo traffic of 1.9 percent in July year-over-year as and capacity expanded 5.3 percent. China’s manufacturing output in July contracted for the sixth consecutive month, hitting exports and imports hard. Slowing demand from the major markets has impacted intra-Asia trade where electronic parts and semi-conductors are shipped by air to factories across the region.
 
In Europe, the story was repeated with carriers reporting a fall in demand of 1.5 percent compared to a year ago and capacity growing 3.9 percent. Central and Eastern Europe has had an especially tough few months, with trade in this region falling around 10 percent since the end of the first quarter.  
 
Even the stronger North American markets struggled in July. Airlines experienced a decline of 3.7 percent year-over-year and capacity grew 5.4 percent. Despite the subdued performance of the U.S. economy in the first quarter, air freight benefited from a modal shift to air as a result of the West Coast port congestion in the U.S. This impact has faded and although economic performance likely improved in the second quarter, IATA said it no longer appeared to be driving stronger air freight demand.
 
Middle Eastern carriers saw the strongest growth with demand expanding by 10.8 percent, but even that solid growth was well below capacity that rose 18.3 percent. The performance might have been even stronger but for the timing of Ramadan, which traditionally gives a boost to air freight. Ramadan started in June this year whereas it took place mostly in July in 2014.
 
Latin American airlines reported a fall in demand of 5.1 percent year-over-year, and capacity expanded 3.2 percent. Regional trade activity, Brazil and Argentina excepted, was very solid in the first half of 2015, but this did not feed through into stronger demand for air freight.
 
African carriers experienced growth in demand of 3.6 percent, and capacity rose by 11.4 percent, IATA data showed. In contrast to Latin America, the strong trade performance in the region has underpinned solid air freight growth, despite the underperformance of the Nigerian and South African economies.

Contact Greg Knowler at greg.knowler@ihs.com and follow him on Twitter: @greg_knowler.