E-commerce lifts Asia-NA volumes as global demand slackens

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Global air freight markets saw demand continue to improve in October, but at a slower pace than the previous month and still below previous year levels, says IATA.

North American carriers posted a 1.3 per cent increase in international demand in October year-on-year, and the second consecutive month of growth in 10 months reflecting strong e-commerce volumes between Asia and North America.

International Air Transport Association (IATA) data for October shows global demand, measured in cargo tonne-kilometres (CTKs), was 6.2 per cent below previous-year levels in October and -7.5 per cent for purely international operations.

While that was a slight improvement from the -7.8 per cent year-on-year drop recorded in September, the pace of recovery in October was slower than in September with month-on-month demand growing 4.1 per cent and 1.1 per cent for international traffic.

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Global capacity, measured in available cargo tonne-kilometres (ACTKs), shrank by -22.6 per cent in October, and -24.8 per cent for international operations, compared to the previous year. IATA notes this is nearly four times larger than the contraction in demand, indicating the continuing severe capacity crunch.

Strong regional variations continue with North American and African carriers reporting year-on-year gains in demand (+6.2 and +2.2 per cent respectively), while all other regions remained in negative territory compared to a year earlier.

Improving performance is aligned with improvements in key economic indicators, IATA says, pointing to improvements in both the Purchasing Managers’ Index (PMI) and World Trade Organisation (WTO) indicators.

IATA4The new export orders component of the manufacturing PMI stayed above the 50-mark for the second month in a row, with results above 50 indicating economic expansion. This a significant development as the PMI had been in negative growth territory from mid-2018 through to August 2020.

And global goods trade continued to trend upwards in recent months, according to the WTO. The uptick will not be sufficient to avoid a full-year decline of 9.2 per cent compared to 2019, IATA cautions. Much of this ground, however, will be regained in 2021 with an expectation of 7.2 per cent annual growth.

IATA also notes that the Global Composite PMI which reflects changes in global output, employment, new business, backlogs, and prices, is indicating an economic recovery will continue in Q4/2020 despite a resurgence of the COVID-19 virus in many markets.Iata5

“Demand for air cargo is coming back, a trend we see continuing into the fourth quarter,” says Alexandre de Juniac, IATA’s director general and CEO. “The biggest problem for air cargo is the lack of capacity as much of the passenger fleet remains grounded. The end of the year is always peak season for air cargo. That will likely be exaggerated with shoppers relying on e-commerce – 80 per cent of which is delivered by air.

“So the capacity crunch from the grounded aircraft will hit particularly hard in the closing months of 2020. And the situation will become even more critical as we search for capacity for the impending vaccine deliveries,” de Juniac adds.

Regional performance

Asia-Pacific airlines saw demand for international air cargo fall -11.6 per cent in October 2020 compared to the same month a year earlier. This was an improvement from the -14.6 per cent fall in September 2020 and the second consecutive month of improvement. International capacity remained constrained in the region, down -28.7 per cent. However, this was an improvement over the -31.8 per cent fall in capacity the previous month. The region’s airlines reported the highest international load factor indicating a solid appetite for air cargo services, IATA notes.

North American carriers posted a 1.3 per cent increase in international demand in October compared to the previous year—the second month of growth in 10 months. This strong performance compared to the rest of the industry was driven by the Asia-North America routes, reflecting rising e-commerce demand for products manufactured in Asia and smaller capacity declines than other regions. The region’s domestic market decelerated slightly from September but remained robust. International capacity decreased by -16.6 per cent.

European carriers reported a decrease in demand of -11.9 per cent in October compared to the previous year. This was an improvement from the -15.6 per cent fall in September 2020. Air cargo in the region has been largely unaffected by the resurgence of the COVID-19 virus, according to IATA. International capacity decreased -28 per cent an improvement from the -32.6 per cent fall the previous month.

Middle Eastern carriers reported a decline of -1.9 per cent in year-on-year international cargo volumes in October, unchanged from September. However, the pace of recovery in October was slower than in September with month-on-month demand, improving 6.0 and 2.5 per cent, respectively. IATA says the weaker performance is driven by less demand in Africa-Middle East trade lanes. International capacity decreased by -22.7 per cent.

Latin American carriers reported a decline of -12.5 per cent in international cargo volumes in October compared to the previous year. This was a significant improvement from the -22.2 per cent fall in September 2020. The pace of month-on-month recovery was the strongest of all regions in October with demand climbing by 4.0 per cent. The region’s improved year-on-year performance can be partly attributed to weak growth in the same period last year. However, improving operating conditions in a few key markets including Brazil and recovering cargo capacity also contributed IATA highlights. International capacity decreased -29.1 per cent compared to the -32.1 per cent contraction in September.

African airlines saw demand increase by 2.8 per cent year-on-year in October. This was lower than the 12.1 per cent growth in September. Despite this, the region still posted the strongest increase in international demand. The slight weakening in performance can be attributed to a slowdown in the Asia-Africa market where demand decelerated by 19 percentage points year-on-year. International capacity decreased by -20.8 per cent.

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