Wednesday, August 7, 2019

Global Air Freight Declines as Poor Trade Relations Affect Business

Africa the Only Bright Spot on International Carriers' Cargo Record
Shipping News Feature
WORLDWIDE – The International Air Transport Association (IATA) has released data for global air freight markets showing that demand for services has decreased for the eighth consecutive month of year-on-year decline in cargo volumes, and the organisation is largely putting the blame at the feet of the US president and the politicians responsible for a heightening of tensions over world trade.

IATA says demand, measured in freight tonne kilometres (FTKs), decreased by 4.8% in June 2019, compared to the same period in 2018. Signs of a modest recovery in recent months appear to have been premature, with the June contraction broad-based across all regions with the exception of Africa. Capacity growth remains subdued and the cargo load factor continues to fall.

Airlines in Asia-Pacific and the Middle East once again suffered the sharpest declines in year-on-year growth in total air freight volumes in June 2019. Globally, trade growth is languishing, and business uncertainty is compounded by the latest tariff increases in the US-China trade dispute, with Alexandre de Juniac, IATA’s Director General and CEO, commenting:

“Global trade continues to suffer as trade tensions, particularly between the US and China, deepen. As a result, air cargo markets continue to contract. Nobody wins a trade war. Borders that are open to trade spread sustained prosperity. That’s what our political leaders must focus on.”

Asia-Pacific airlines saw demand for air freight contract by 5.4% in June 2019, compared to the same period in 2018. Although an important factor, the US-China trade war is not solely responsible for the fall. FTKs for the Asia internal cargo market have decreased more than 10% over the past year. Air freight capacity increased by 1.8% over the same period.

North American airlines’ freight demand decreased by 4.6% in June 2019, compared to the same period a year earlier. Again capacity increased by 1.9% over the past year. US-China trade tensions are weighing on the performance, with FTKs to Asia down 5%, however FTKs on routes to/from Europe, South America and Middle East were also lower.

Similarly European airlines posted a 3.6% decrease in freight demand in June 2019 compared to the same period a year earlier. Comparatively strong cargo volumes within Europe are helping to minimise the impact of weaker German exports. Capacity increased by 2.8% year-on-year.

Middle Eastern airlines’ freight volumes decreased by the largest margin at 7.0% in June 2019 compared to the same period in 2018. Capacity increased by 2.7%. Seasonally-adjusted demand has been falling since late 2018, and the latest data show volumes to Europe (-7.2%) and Asia-Pacific (-6.5%) were particularly weak.

Latin American airlines suffered less than other regions but still experienced a decrease in freight demand in June 2019 of 1.0% compared to the same period last year whilst capacity increased by 4.6%. Much of the decline in traffic can be attributed to weakness in the within-South America market (especially Brazil and Argentina) where FTKs fell 6.5%.

African carriers were the only ones to report growth in June 2019, with an increase in demand of 3.8% compared to the same period a year earlier. This makes Africa the strongest performer for the fourth consecutive month. Capacity grew by a larger factor - 16.6%. Route analysis shows that the Africa-Asia performance is strong, up 12% year-on-year.