Air Freight Volumes Grow Significantly Despite Static Revenue says IATA

WORLDWIDE – The International Air Transport Association (IATA) has released its full-year air cargo data for 2014 which shows a 4.5% growth in global freight tonne kilometres (FTKs) as compared to 2013 (a significant improvement on growth of just 1.4% in 2013 versus 2012). The year finished on a particularly positive note, with growth in December accelerating to 4.9%, compared to December 2013. Most of the improvement in air freight in 2014 was carried by airlines in Asia Pacific and the Middle East which respectively contributed 46% and 29% of the expansion in FTKs. Though these figures set the stage for a promising 2015, IATA has taken a more cautious view with Tony Tyler, IATA’s Director General and CEO, saying:

“After several years of stagnation, the air cargo business is growing again. This is largely being driven by the uptick in world trade over the second half of 2014. Recent concerns over the health of the global economy and a corresponding fall in business confidence have not yet impacted air cargo. But it is a downside risk that will need to be watched carefully as we move through 2015.”

During the first half of 2014, air freight volumes and world trade overall went through a weak patch, but there was a marked acceleration during the second half of last year. Notably, this improvement in international trade during those last six months took place while domestic industrial production growth remained stable. The acceleration of world trade relative to domestic production in the second half, comes after several years of interruption to the previous upward trend. This flat-lining of the trade production ratio has been bad news for demand for air freight in recent years, dampening the strength of the cyclical upturn in air freight last year. IATA says that it is too soon to say whether the last half year signals a diminution of the adverse impact of recent on-shoring and trade protectionism, but added that it is certainly a development worth watching.

On a regional basis, performance seemed to vary widely and nearly all of the regions reported a strengthening of demand in December. Latin America was the only region to report a decline with FTKs falling 4.5% in December and a marginal increase of 0.1% in 2014 as a whole. These numbers reflect the major economic problems plaguing the region.

Growth in air freight carried by European airlines was also weak in 2014, expanding just 2% overall and 2.3% in December. The Eurozone remains close to recession, with the effects of Russian sanctions also having an impact. Load factors also fell in 2014 while capacity expanded 3%. Before the sanctions came into force in March 2014, European carriers had seen a steady increase in demand since mid-2013 which slowly tapered off as the year progressed with more restrictions coming into force. The North Atlantic and markets to Asia remain sources of potential growth, but the negative impacts of weak home markets are a significant weakening factor. As a result European airlines have seen very little growth in the FTKs they carry and face declining load factors.

Conversely, Asia Pacific carriers grew 5.9% in December compared to 2013, and 5.4% for 2014 as a whole. The region was only the third fastest growing region in FTKs for the year, but that increase still represented over 46% of the total expansion in the market. IATA says that this is the most important region for air freight, mostly because a large part of the world’s manufacturing takes place in the region but increasingly because there are growing numbers of middle-income consumers.

After a slow, weather-affected start to the year, North American airlines reported demand growth of 2.8% in December. For 2014, FTKs expanded by 2.4% a solid improvement on 2013 when volumes fell 0.4% for the year as a whole. However, the North American airlines have been cutting back on capacity by 0.5%, as they seek to improve financial performance.

Middle Eastern carriers once again enjoyed the strongest growth of any region, expanding 11.3% in December and 11% for the year as a whole. Airlines in the region have extended their networks and grown capacity by 11.1% to make the Middle East a hub for freight traffic. In fact they have been responsible for over 37% of the total increase in global freight capacity in 2014.

African airlines, although carrying a small part of worldwide FTKs, saw the second fastest expansion in air freight volumes, 6.7% in 2014 overall and 12.2% in December alone. Although major economies Nigeria and South Africa underperformed during parts of 2014, regional trade activity held-up, supporting demand for air transport of goods. Summarising the year and looking ahead further into 2015, Tyler said:

“Despite the improving growth trend, big challenges remain. Yields declined for the third straight year in 2014, with no immediate prospect of improvement. Cargo revenues remained basically unchanged at $62 billion, some $5 billion below their 2011 peak. To move forward, the industry is focusing on providing a stronger value proposition to meet evolving customer needs. That’s what is driving efforts such as cutting shipping times, ensuring high-quality handling of temperature-sensitive goods, or benchmarking quality to improve customer transparency. It’s all about delivering value as a supply chain with a strong vision of the future.”