Air Freight Momentum is Lost As World Trade Slows
As world trade growth weakens, growth in demand for air freight is slowing, according to figures recently released by the Montreal, Canada-headquartered International Air Transport Association (IATA).
“After a volatile start to 2015, the market is settling down, and it is clear that momentum in air freight growth is being lost,” said IATA Director General and CEO Tony Tyler. “After a brief optimistic period, the global outlook for cargo shows that once again the business is stagnating.”
But, “The good news is that with digital processes, new standards for pharmaceutical handling, and a focus on reducing end-to-end shipment times, the air cargo industry is well-placed to stage a recovery,” adds Tyler.
In it’s latest air cargo report, IATA states that compared with average growth of 5.3 percent over the first three months of the year, air cargo volumes rose 3.3 percent in April, with only the Asia-Pacific and Middle East regions reporting growth.
“It is clear that the momentum in air freight growth is being lost,” says Tyler. “First there is the structural challenge of world trade no longer expanding at a faster rate than domestic production. Layered on top of that trend we now see a weakening of economic indicators in the crucial air cargo markets of Asia-Pacific and Europe.”
Those factors “point toward a need to kick-start trade by reversing protectionist trade measures. Implementing the Bali Trade Facilitation Agreement would be a good start, as well as commitments to help facilitate trade in emerging markets,” he says.
SOME CARRIERS SEE GROWTH SOAR, OTHERS SHOW TEPID GROWTH OR DECLINE
Compared to April 2014 with a capacity expansion of 7.0 percent, Asia-Pacific carriers now report regional demand growth of 4.5 percent in April 2015. Current trade volumes for emerging Asia markets are down 10 percent, and the region being affected by a slowdown in exports to Europe.
Compared to a year ago, European carriers saw demand decline by 0.3 percent in April, while capacity grew by 5 percent. “Recent improvements in European business confidence have yet to reflect in air freight volumes,” says Tyler. “A firming-up of oil prices and the Euro has meant that positive momentum from the European Central Bank stimulus has faltered.”
North American airlines reported demand growth of 0.1 percent year-on-year while capacity was cut by 1.6 percent. “A disappointing economic performance in the first quarter is expected to improve in the coming months, with the likely impact of falling oil prices and the end of the West Coast port strikes,” the IATA CEO says.
On the back of increased trade within the region, along with network and capacity expansion, air cargo demand in the Middle East grew by 14.1 percent,. Capacity grew 18.5 percent.
African airlines experienced a 0.2 percent decline in demand and a 2.2 percent decrease in capacity as “the region still appears to be affected by the under-performance of the Nigerian and South African economies,” says Tyler.
While the capacity of carriers in Latin America grew by 7 percent during the period, airlines reported a decline of 6.8 percent in demand. Month-on-month results for carriers in the region “indicate that recent declines may have come to an end. The hope is that general increases in regional trade activity start to be reflected in stronger air freight demand,” he concludes.