The latest data from the International Air Transport Association (IATA) for global air freight markets indicates the slowdown in air cargo growth that began earlier in 2018 is continuing, with the growth for the first half of this year standing at 4.7 per cent, less than half the growth rate in 2017.
Global air cargo demand, measured in freight tonne kilometres (FTKs), rose 2.7 per cent in June 2018, compared to the same period the year before with Asia posting a growth of only 1.5 per cent.
We are now seeing a structural slowdown in global trading conditions as indicated by the fall in the Purchasing Managers Index (PMI) to its lowest level since 2016. Factory export order books have turned negative in China, Japan and the US. – Alexandre de Juniac, IATA’s director general and CEO.
Freight capacity, measured in available freight tonne kilometres (AFTKs), rose by 4.1 per cent in June 2018. Capacity growth has now outstripped demand growth in every month since March.
IATA said a number of factors are behind the slowdown including the ending of the restocking cycle, during which businesses rapidly built up inventories to meet demand, early this year.
“We are now seeing a structural slowdown in global trading conditions as indicated by the fall in the Purchasing Managers Index (PMI) to its lowest level since 2016. Factory export order books have turned negative in China, Japan and the US.”
The global airline association added that the temporary grounding of the Nippon Cargo Airlines fleet in the second half of June exaggerated the slow-down by shaving up to 0.5 percentage points off June growth.
“Air cargo continues to be a difficult business with downside risks mounting,” warned Alexandre de Juniac, IATA’s director general and CEO. “We still expect about 4.0 per cent growth over the course of the year. But the deterioration in world trade is a real concern.
“While air cargo is somewhat insulated from the current round of rising tariff barriers, an escalation of trade tension resulting in a ‘reshoreing’ of production and consolidation of global supply chains would change the outlook significantly for the worse.
“Trade wars never produce winners. Governments must remember that prosperity comes from boosting their trade, not barricading economies,” de Juniac added.
All regions except Africa reported a year-on-year increase in freight volumes in June 2018, but the slow growth in Asia-Pacific, which accounts for nearly 37 per cent of the entire air cargo market, dragged the global growth rate down.
Asia-Pacific airlines saw freight demand increase by just 1.5 per cent in June 2018 compared to the same period last year, while capacity increased by 5.2 per cent. The international freight performance by the region fell to 1.1 per cent, a 17-month low, although this partially reflects comparisons with the strong performance in June 2017, IATA said.
For the first six months of 2018 FTKs expanded by 4.6 per cent year-on-year, and freight volumes are expected to settle at an annual 3-4 per cent growth.
European airlines posted a 3.3 per cent increase in freight volumes in June 2018, with capacity increasing by 5.4 per cent. Growth is being affected by a slowdown in export orders. Supply chain bottlenecks, which are often alleviated by air freight, have also eased. For the first half of 2018, the region expanded 4.1 per cent year-on year.
North American airlines‘ freight volumes expanded 3.8 per cent in June 2018 compared to the same period a year earlier. International FTK performance was 5.9 per cent, making the region the strongest-performing market for the first time in two years.
The strong dollar and robust growth in the US economy is driving inbound shipments. Capacity increased by 3.4 per cent with growth for the first half of 2018 coming in at 5.3 per cent, second only to exceptional growth in Latin America.
Middle Eastern carriers‘ freight volumes grew 3.8 per cent in June. This was an improvement on the May figure of 2.7 per cent, but this is well below the average five-year rate of 9.5 per cent. Capacity increased 4.5 per cent. Growth for first half of 2018 was 4.3 per cent year-on-year, and the expectation is for volume growth to remain modest in the months to come, IATA said.
Latin American airlines experienced growth in demand of 5.9 per cent in June 2018 – continuing its recent run of posting the largest increases of any region. Unusually, capacity decreased by 5.7 per cent. The pick-up in demand for international freight (5.2 per cent) slowed compared to last month, but continues to trend well above the five-year average (1.6 per cent). Growth for the first six months of 2018 was 10.1 per cent, comfortably the best performance of any region.
African carriers saw freight demand contract 8.5 per cent in June 2018 compared to the same month last year. Capacity also fell, by 1.4 per cent. “It is difficult to be positive about the current picture in Africa,” IATA said.
International FTKs fell at the fastest pace (-8.6 per cent) in nearly nine years. Although the year-on-year growth rate for the first half of 2018 was 3.0 per cent, in seasonally-adjusted terms, FTKs are trending downward at an annualised rate of almost 20 per cent over the past six months, and demand conditions are weak on all the main markets to and from the continent, IATA said.
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