Coronavirus Threatens to Ground Air Cargo Growth After Worst Year in Decade
Date: Wednesday, February 12, 2020
Source: Sourcing Journal
In the draft of worldwide air freight‘s worst year in a decade, the International Air Transport Association (IATA) warned that the coronavirus outbreak portends “another challenging year for the air cargo business” in 2020.
For 2019, global air freight market demand fell 3.3 percent compared to 2018, IATA reported Wednesday. This was the first year of declining freight volume since 2012, and the weakest performance since the global financial crisis in 2009, when air freight markets contracted 9.7 percent.
In December, cargo volumes declined 2.7 percent year on year, while capacity rose 2.8 percent. While there are signs that confidence and orders could pick up in 2020, the long-term effects from the impact of restrictions associated with combating coronavirus could change that mood, IATA said.
“Trade tensions are at the root of the worst year for air cargo since the end of the Global Financial Crisis in 2009,” Alexandre de Juniac, IATA’s director general and CEO, said. “While these are easing, there is little relief in that good news as we are in unknown territory with respect to the eventual impact of the coronavirus on the global economy. With all the restrictions being put in place, it will certainly be a drag on economic growth. And, for sure, 2020 will be another challenging year for the air cargo business.”
According to a Resilience360 report, air freight is expected to be heavily impacted by the coronavirus outbreak, with more than 25,000 flights to, from or within China being canceled. Inbound shipments to China are likely starting to congest terminals and warehouses, while outbound shipments could face reduced capacity over the next few months, the report said.
Port operations in China remain largely unaffected, with the exception of Wuhan and other ports along the Yangtze River, where barge services have been suspended, Resilience360 noted. However, delays can be expected at ports worldwide accepting bookings to China, as cargo may be held for a longer period, causing storage and equipment demurrage costs.
CMA CGM Group said Tuesday that except for Wuhan, all of its operations continue to operate uninterrupted. Load and discharge moves at Wuhan port have been suspended until further notice.
For the health of its seafarers, strict hygiene measures have been put in place onboard vessels, the ocean freight carrier said, and in order to limit their exposure to the virus, crew is restricted from getting off at the affected ports.
“The influx of multiple and at times overlapping sets of regulations issued from different levels of government within a short span of time has meant that companies with plants and suppliers across China will need to cope with additional regulatory ambiguity as they attempt to plan their production schedules accordingly,” the Resilience360 report said.
Regarding air freight, IATA reported that all markets except Africa suffered volume declines in 2019.
Asia-Pacific carriers posted a 3.5 percent decrease in demand in December compared to the same period a year earlier. Full-year volume declined 5.7 percent, the largest decrease of any region.
“As the world’s main manufacturing region, international trade tensions and the global growth slowdown weighed heavily on regional air freight volumes in 2019,” IATA said.
North American airlines saw volume fall 3.4 percent in December, while for the year, the region’s cargo volume was off 1.5 percent. Trade tensions and cooling U.S. economic activity in the latter part of the year were cited as main factors in the decline.
European airlines experienced a 1.1 percent year-on-year decrease in freight demand in December, while for all of 2019 as a whole, volume fell 1.8 percent. Middle Eastern carriers’ freight volumes decreased 3.4 percent year on year in December, contributing to an annual decline of 4.8 percent.
Latin American airlines suffered the sharpest fall in demand, 5.3 percent, of any region in December. Although the region was the second-strongest performer across 2019 as a whole, limiting its decline in volume to 0.4 percent, social unrest and economic difficulties in several key countries led to the weakest international outcome since 2015, IATA said.
African carriers’ saw freight demand increase 10.3 percent in December compared to the same month in 2018. This was reflected in the strong 2019 full-year performance, which saw African freight volume expand 7.4 percent. Over the year, air cargo volume has been supported by strong capacity growth and investment linkages with Asia.