Trade Turmoil Cited as Air Freight Demand Drops to Three-Year Low

Date: Tuesday, March 12, 2019
Source: Sourcing Journal

Global air freight demand fell 1.8 percent in January compared to a year earlier, marking the worst performance in the last three years, according to a new report from the International Air Transport Association (IATA).

Demand for air cargo continues to face significant headwinds, IATA said, with weakened global economic activity and consumer confidence. The report noted that the Purchasing Managers Index for manufacturing and export orders has shown falling global export orders since September.

“Air cargo markets contracted in January–this is a worsening of a weakening trend that started in mid-2018,” Alexandre de Juniac, IATA’s director general and CEO, said. “Unless protectionist measures and trade tensions diminish, there is little prospect of a quick re-bound.”

At the same time, freight capacity rose 4 percent year-on-year in January, the 11th month in a row that capacity growth outstripped demand growth, IATA data showed.

Only two of six regions, North America and Africa, reported year-on-year demand growth in January. Asia-Pacific, Europe and the Middle East all saw demand decrease, while Latin America’s was flat.

Air freight demand for Asia-Pacific dropped 3.6 percent in the month compared to January 2018. “Weaker manufacturing conditions for exporters in the region, ongoing trade tensions and a slowing of the Chinese economy impacted the market,” according to IATA.

The U.S. and China are still trying to negotiate their way through a trade war that emerged in 2018 resulting in tariffs imposed by both countries on each other’s imports and stirring sourcing tensions and shifts in a variety of sectors, including apparel, textiles and footwear.

North American airlines posted the fastest growth of any region for the eighth consecutive month in January, with an increase in demand of 3.3 percent compared to a year earlier.

“The strength of the U.S. economy and consumer spending have helped support the demand for air cargo over the past year, benefiting U.S. carriers,” IATA said.

Freight demand at European airlines declined 3.1 percent in January, as weaker manufacturing conditions for exporters and shorter supplier delivery times, particularly in the key export market of Germany, impacted demand. IATA noted that trade tensions and uncertainty surrounding Brexit also contributed to the showdown.

Middle Eastern airlines’ freight volumes contracted 4.5 percent in January. IATA noted that international air cargo demand that had trended upward the previous three months, has started to decline.

The flat demand for Latin American airlines came amid economic uncertainty in the region. However, several key markets are performing ell, IATA data showed. For example freight traffic within South America and between Central and South America grew at a double-digit rate in January, while demand on routes between North and South America also showed strength.

African carriers saw freight demand increase 1 percent in the month, with air cargo demand now trending upward for six months.

 

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