Air cargo demand rose 11.4 percent in July, more than double the 3.7 percent expansion in capacity, setting the stage for higher rates as shippers rush to meet peak season demand.
July’s performance was the third-straight month of double-digit gains and also nearly four times as large as the 10-year annual growth rate of 3.1 percent, according to the International Air Transport Association (IATA), which attributed the growth to higher levels of global trade, rising export orders, and upbeat business confidence.
"July was a strong month for air cargo with double-digit growth. And for the third consecutive month demand for air freight grew at a faster pace than demand for air travel. Although the outlook for the rest of the year remains positive, there are signs that the cyclical growth period may be nearing a peak," said Alexandre de Juniac, IATA’s director general and CEO.
Signs of that peak include that seasonally-adjusted air cargo volumes were flat in June and fell in July, while the global inventory-to-sales ratio has stabilized. That stabilization is important because air cargo demand typically rises at the start of an economic upturn as companies rush to restock inventories, IATA said.
The continuing growth is likely to lead to higher rates for air cargo, particularly on the Asia-Europe trade, where demand is close to outstripping capacity. Asia-Europe air cargo demand has grown by double digits in nine of the past 11 months, IATA said.
Demand to the United States has also shown strong growth, with air cargo imports to the country up 12.5 percent year over year on the back of the strong US dollar. The euro exchange rate is 1 euro to $1.20, and the euro will weaken against the dollar before the end of the year to end at 0.9 euros per dollar, according to IHS Markit. The Chinese renminbi is now at 6.5 per dollar, but IHS Markit expects it to strengthen to 6.8 by the end of the year.
African carriers led demand growth, with traffic up 33.7 percent year over year in July, which is the second-fastest monthly increase in the last seven years, as capacity grew 4.5 percent. Africa’s growth was driven by trade to and from Asia, which skyrocketed 65 percent in the first half.
European carriers’ growth was the second-fastest, up 12.1 percent as capacity rose 5.5 percent, followed by North American carriers’ growth of 11.9 percent as capacity grew 1.1 percent, and Asia-Pacific airlines, which reported an 11 percent increase in demand and a 6.3 percent uptick in capacity.
Middle Eastern carriers were toward the back of the pack, with growth of 9.3 percent and a capacity increase of just 0.4 percent. Latin America, where the largest economy of Brazil is still working its way out of recession, was the most lackluster performer, as carriers in the region reported a 5.8 percent increase in demand and a 4.7 percent increase in capacity. On a seasonally-adjusted basis, Latin America cargo volumes were down 9 percent from the peak reached in 2014.