Industry-wide freight tonne kilometres (FTKs) for March are marginally higher – up 0.1 per cent – compared with their level of a year ago and a sharp turnaround from February’s 4.9 per cent dive.
“Although this represents a sharp turnaround from last month, it would be premature to view this outcome as a change in the recent trend, especially given the typical data volatility in the early months of the year, the International Air Transport Association (IATA) says in its latest market analysis.
But in seasonally adjusted terms, demand is still down 1.5 per cent over the same period past year.
And despite a sizeable improvement in March, international FTKs flown by Asia Pacific airlines are still 3.8 per cent lower than their level of a year ago, making this region the weakest performer. With the region accounting for around 32 per cent of total international FTKs, this weakness is the main contributor to the soft industry-wide outcome.
As the world’s main manufacturing and assembly hub, the slowdown in world trade, combined with a slowing in the Chinese economy in 2H18 and ongoing trade tensions between China and the US have all weighed upon the annual air freight performance of the region, IATA notes.
Global trade volumes, which had been steadily climbing since mid-2016 have sharply dipped since Q4 2018. IATA notes that global trade volumes have fallen by around 1.0 per cent over the past year.
This fall is also reflected in the new export orders component of the global manufacturing Purchasing Managers’ Index (PMI). IATA notes that the new export orders measure provides a reliable guide to near-term developments in air freight outcomes. In month-on-month terms, the PMI series has increased only twice in the past 14 months and has been below the key 50-mark (within the area normally associated with falling export orders), since September 2018.
Freight capacity (in AFTKs), meanwhile, rose by 3.1 per cent year-on-year in March 2019 with capacity growth outstripping demand growth for 11 out of the last 12 months. IATA notes the rate of capacity growth has clearly moderated over the past year or so, from a 6-7 per cent year-on-year pace, as airlines have adjusted to the weaker demand environment.
“Year-on-year demand for air freight edged back into positive territory in March with 0.1 per cent growth,” says Alexandre de Juniac, IATA’s director general and CEO. “After four consecutive months of contraction, this is an encouraging development. But the headwinds from weakening global trade, growing trade tensions and shrinking order books have not gone away,” he adds.
Industry confidence regarding the outlook, however remains relatively upbeat with only 13 per cent of respondents from IATA’s Business Confidence Survey expecting to see a decrease in freight volumes in 2019 compared to 2018. More than half of the survey respondents (54 per cent) expect freight volumes to increase over the coming year.
All regions reported year-on-year demand growth in March 2019, except Asia-Pacific which contracted, although by a less dramatic amount than February.
Asia-Pacific airlines saw demand for air freight shrink by 3.4 per cent in March 2019, compared to the same period in 2018. This was a significant improvement from the 12 per cent decline in growth from the previous month. Weaker manufacturing conditions for exporters in the region, ongoing trade tensions and a slowing of the Chinese economy impacted the market. Capacity decreased by 1.0 per cent.
North American airlines saw demand increase by 0.4 per cent in March 2019, compared to the same period a year earlier. The recent easing of growth is partly due to a slowing of US domestic economic activity in the later part of 2018 and falling global trade volumes. Despite this, new export orders are rising which would support air cargo growth. Capacity increased by 2.6 per cent over the past year.
European airlines posted a 3.6 per cent increase in freight demand in March 2019 compared to the same period a year earlier. Given the weaker manufacturing conditions for exporters in Germany, and uncertainty over Brexit, March’s performance represents a positive outcome, IATA notes. Capacity increased by 6.4 per cent year-on-year.
Middle Eastern airlines’ freight volumes increased 1.3 per cent in March 2019 compared to the year-ago period. Capacity increased by 3.8 per cent. A clear downward trend in seasonally-adjusted international air cargo demand is now evident with weakening air freight volumes to/from North America and to/from Asia Pacific contributing to the softer performance.
Latin American airlines experienced an increase in freight demand growth in March 2019 of 3.6 per cent compared to the same period last year and capacity increased by 16.9 per cent. The emergence of the Brazilian economy from recession is supporting a resurgence in air cargo demand. Nevertheless, ongoing economic and political uncertainties in various parts of the region continue to present challenges for the industry.
African carriers posted the fastest growth of any region in March 2019, with an increase in demand of 6.0 per cent compared to the same period a year earlier. Seasonally-adjusted international freight volumes are lower than their peak in mid-2017; despite this, they are still around 30 per cent higher than their most recent trough in late-2015. Capacity grew 15.2 per cent year-on-year.