15 Jan 2016
After a very volatile first quarter, so far in Q2 air cargo markets appear to be back down to end-2014 levels
2014 was a comeback year for air cargo, freight tonnes carried by air grew 4.5% outpacing world trade growth of 3.0%
The economic cycle and world trade continue their upturn, with world trade expected to grow 3.7% in 2015
Stronger growth in advanced economies and air freighted commodities leave room for cautious optimism later in 2015
However, so far this year world trade and FTKs have stopped growing, partly due to the build-up in inventories, capacity challenges persists, for every 1 tonne of new freighter hull capacity 3 tonnes will be added by pax aircraft, Cargo-only services are more sensitive to fuel price changes but on avg earned a premium of 10% over belly in 2014, Yield performance has varied significantly by trade lane, direction and service type and lower ocean container rates point to increasing competitive pressures
However, the steep fall in jet fuel costs is helping boost cargo profitability this year
Economic Outlook & Traffic Performance
Growth in air freight in 2014 was helped by continued upturn in the economic cycle and resilient demand for air freighted commodities (1). With the upturn taking hold in advanced economies, air freight demand was particularly favorably impacted. During upturn phases, FTK growth averages 3-5% points more than growth in world trade in goods. As firms replenish inventory and source components to build up production schedules.
2014 saw the strongest growth in air freight carried since the 2010 “rebound” in world trade, freight tonnes carried grew by 4.5% outpacing world trade growth of 3.0% (2). Year-to-April international FTK were 3.8% higher in 2015 compared to a year ago, however, when looking at seasonally adjusted FTK levels only a sideways trajectory can be observed since 2014.
In 2013, advanced economies contributed 18% to total global economic growth, compared to 51% in 2014. The lower than expected growth of advanced economies in 2015 is in part explained by exceptional events, severe Q1 weather in US and political grandstanding on sovereign debt deliberations in Europe rather than underlying drivers supporting deceleration. Improved growth performance in advanced economies, aided by accommodative monetary policy and loose bank lending standards (4), is still expected to continue in 2015. The combination of these factors is a source of optimism for ushering in another year for air cargo to outpace growth in overall world trade. However, weakness in emerging markets and scope for potential spill over from the slowing of the Chinese economy introduce downside risks for the outlook in 2015
Friday, December 04, 2015
The International Air Transport Association (IATA) has released data for global air freight markets showing air cargo volumes measured by freight tonne kilometres rose just 0.5 per cent in October compared to a year ago.
Year-over-year expansion fell back from September’s faster growth rate, and total cargo volumes in October stand 1.1 per cent lower than the peak of the uptrend at the end of 2014.
European carriers have driven recent improvements in air cargo growth, but they ran out of steam in October with a rise of just 0.2 per cent. Other regions also underlined the weak October trend. The most significant decline in cargo activity was experienced by North American carriers, which reported a 2.4 per cent fall in volumes. Latin America (-8.1 per cent) and Africa (-1.1 per cent) are smaller markets and also declined. Asia-Pacific was up, little more than Europe with a rise of 0.3 per cent. Growth in the Middle East, although a robust 8.3 per cent, was some 4.3 percentage points down on the average performance for the year to date.
"The outlook for air cargo continues to be very difficult. While there was some optimism from third quarter growth it has all but disappeared as the industry basically flat-lined. Cargo capacity has grown largely in lock-step with the continued robust demand for passenger travel. As a result, freight load factors have sunk to the 44 per cent range—a level not seen since 2009. Early signs of improvement in export orders may bode well for trade and air cargo but this is unlikely to prevent air cargo finishing 2015 on a low note," said Tony Tyler, IATA’s director general and ceo.
Oct 2015 vs. Oct 2014 FTK growth AFTK growth FLF
International 0.5% 6.0% 48.0%
Domestic 0.4% 4.2% 31.2%
Total market 0.5% 5.7% 44.8%
YTD 2015 vs. YTD 2014 FTK growth AFTK growth FLF
International 3.0% 6.6% 47.3%
Domestic 0.2% 2.6% 29.9%
Total market 2.6% 5.8% 44.0%
Regional analysis in detail
• Asia-Pacific carriers saw a slight rise in FTKs of 0.3 per cent in October compared to October 2014, and capacity expanded 2.9 per cent. Trade growth in China and other key export economies remains disappointing. Chinese export orders, however, spiked in October, which could result in better demand for air freight in the next 2-3 months.
• European carriers reported a rise in demand in October of just 0.2 per cent compared to a year ago and capacity rose 5.6 per cent. Although this is a weaker performance than in recent months, improvements in the eurozone are expected to continue, especially trade activity to/from Central and Eastern Europe.
• North American airlines experienced a decline of 2.4 per cent year-on-year and capacity grew 6.0 per cent. There are mixed signals from this market. Recent month-to-month results appeared to indicate a return to growth, but the latest manufacturing and export reports are poor. Strong demand for air freight in the coming months appears unlikely.
• Middle Eastern carriers saw demand expand by 8.3 per cent and capacity rise 11.6 per cent. Recent air cargo growth in the region continues to trend well below the rates seen for the first half of the year. Saudi Arabia and the UAE, among others in the region, have seen slowdowns in non-oil sectors, but growth rates remain robust enough to sustain solid demand for air cargo.
• Latin American airlines reported a decline in demand of 8.1 per cent year-on-year, and capacity expanded five per cent. Year-to-date performance for Latin American air cargo is the worst of any region by some margin, contracting by 5.9 per cent. Air cargo demand appears to be mirroring weakening consumer sentiment in key regional economies.
• African carriers experienced a fall in demand of 1.1 per cent, and capacity rose by 6.9 per cent. Despite the October result, Africa is still the second fastest growing air cargo market for the year to date. Demand is holding up despite the under performance of Nigeria and South Africa.