Global air freight markets declined by 3.9 per cent in August 2019, year-on-year, for the tenth consecutive month as the US-China trade war continues to drag on air cargo.
The ten consecutive monthly declines represents the longest period of continual contraction since the global financial crisis in 2008.
And capacity growth has now outstripped demand growth for the 16th consecutive month, the International Air Transport Association (IATA) says in its latest statistics release. Freight capacity, measured in available freight tonne kilometers (AFTKs), rose by 2.0 per cent year-on-year in August 2019.
“Air cargo continues to face strong headwinds from the intensifying trade war between the US and China, as well as weakness in some of the key economic indicators and rising political uncertainties worldwide,” IATA says. Global trade volumes are 1.0 per cent lower than a year ago.
Trade in emerging countries has been underperforming that of advanced nations throughout most of 2019, notes IATA. This is due to higher sensitivity of the emerging economies to trade tensions, rising political instability and sharp currency depreciation in some of the key emerging markets, it says.
Global export orders continue to fall with the global Purchasing Managers Index (PMI) remaining in contraction territory. Its tracking of new manufacturing export orders has pointed to falling orders since September 2018. And for the second month in a row, all major trading nations reported falling orders.
“The impact of the US-China trade war on air freight volumes was the clearest yet in August,” says Alexandre de Juniac, IATA’s director general and CEO. “Year-on-year demand fell by 3.9 per cent. Not since the global financial crisis in 2008 has demand fallen for 10 consecutive months. This is deeply concerning.
“And with no signs of a détente on trade, we can expect the tough business environment for air cargo to continue. Trade generates prosperity. Trade wars don’t. That’s something governments should not forget,” de Juniac adds.
Airlines in Asia-Pacific and the Middle East suffered sharp declines in year-on-year growth in total air freight volumes in August 2019, while North America and Europe experienced more moderate declines. Africa and Latin America both recorded growth in air freight demand compared to August last year.
Asia-Pacific airlines saw demand for air freight contract by 5.0 per cent in August 2019, compared to the same period in 2018. The US-China trade war along with the slowdown in the Chinese economy have significantly impacted this region. The temporary shutdown of Hong Kong International Airport – the largest cargo hub in the world – added additional pressure, says IATA.
With the Asia-Pacific region accounting for more than 35 per cent of total FTKs, this performance is the major contributor to the weak industry-wide outcome. Air freight capacity increased by 2.3 per cent over the past year.
North American airlines saw demand decrease by 2.4 per cent in August 2019, compared to the same period a year earlier, while capacity increased by 1.3 per cent. The US-China trade war and falling business confidence continue to weigh on the region’s carriers. Freight demand has contracted for the largest routes between Asia and North America, where seasonally-adjusted volumes are down almost 5.0 per cent compared to their level in July 2018.
European airlines posted a 3.3 per cent decrease in freight demand in August 2019 compared to the same period a year earlier. Weaker manufacturing conditions for exporters in Germany, softer regional economies, and ongoing uncertainty over Brexit, have impacted the recent performance. Capacity increased by 3.3 per cent year-on-year.
Middle Eastern airlines’ freight volumes decreased 6.7 per cent in August 2019 compared to the year-ago period. This was the sharpest drop in freight demand of any region. Capacity decreased by 0.8 per cent. Escalating trade tensions, the slowing in global trade and airline restructuring have impacted the region’s performance since the fourth quarter of 2018. Economic uncertainty from oil price volatility among the region’s oil reliant markets has added additional pressure.
Latin American airlines experienced an increase in freight demand in August 2019 of 0.1 per cent compared to the same period last year and a capacity decrease of 2.9 per cent. Low economic growth compounded by the US-China trade war and political instability in some countries have impacted the region’s performance. Recent currency volatility in the region’s key economies have also contributed.
African carriers posted the fastest growth of any region in August 2019, with an increase in demand of 8.0 per cent compared to the same period a year earlier. This continues the upwards trend in FTKs that has been evident since mid-2018 and makes Africa the strongest performer for the sixth consecutive month, according to IATA.
Capacity grew 17.1 per cent year-on-year. Strong trade and investment linkages with Asia have underpinned a double-digit increase in air freight volumes between the two regions over the past year. China recently confirmed a further USD 60 billion investment into the continent.