Why Air Freight Is On a Year-Long Decline in Demand

Date: Thursday, December 5, 2019
Source: Sourcing Journal

Marking a weak start to the traditional peak season for air cargo, global air freight demand decreased 3.5 percent in October compared to a year earlier, according to a new report from the International Air Transport Association (IATA).

This was the 12th consecutive month of year-on-year declines in freight volumes. IATA noted. Freight capacity rose 2.2 percent year-on-year in October. Capacity growth has now outstripped demand growth for the 18th consecutive month.

Over the past year, air cargo has suffered from the effects of the trade war between the U.S. and China, the deterioration in global trade and a broad-based slowing in economic growth, IATA said.

“Air cargo’s peak season is off to a disappointing start,” Alexandre de Juniac, IATA’s director general and CEO, said. “Demand is set to decline in 2019 overall–the weakest annual outcome since the global financial crisis. It has been a very tough year for the air cargo industry.”

Airlines in Asia-Pacific and the Middle East posted sharp declines in year-on-year growth in total air freight volumes in October 2019, while Latin American and European carriers experienced a more moderate decline. Africa was the only region to record growth in air freight demand compared to October last year.

Asia-Pacific airlines saw demand for air freight contract 5.3 percent in October, compared to a year earlier.

“The U.S.-China and South Korea-Japan trade wars have negatively affected the region,” IATA said. “And the disruption to operations at Hong Kong International Airport–the largest cargo hub in the world–continues to impact activity.”

Air freight demand for North American airlines fell 2.4 percent in the month from a year earlier. The strength of the U.S. economy has seen domestic air cargo outperform international, which has also been impacted by the trade tensions with China, IATA said.

European airlines posted a 1.5 percent decline in freight demand in October year to year, which was an improvement over the 3.5 percent decrease in September. Better-than-expected economic activity in the third quarter in several of the region’s large economies buoyed demand, IATA said.

Middle Eastern airlines saw freight volumes drop 6 percent in October compared to the year-ago period. This was the sharpest drop in freight demand of any region for the month.

“Against a backdrop of operational and geopolitical challenges facing some of the region’s key airlines, seasonally adjusted freight volumes in the region have resumed a modest upwards trend, which is a positive development for the region’s carriers,” IATA said.

Latin American airlines experienced a 2.6 percent falloff in freight demand in the month, as various social and economic headwinds in the region’s key economies impacted the region’s air cargo performance.

African carriers posted the fastest growth of any region in October 2019, with an increase in demand of 12.6 percent compared to a year earlier. Strong trade and investment links with Asia contributed to the positive performance, with freight volumes on key Africa-Asia routes up 23 percent annually through September.

 

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