Air cargo traffic is prospering as normally seen at the start of an economic uplift raise demand for fast air transport to get goods to market as quickly as possible. Though the US economic recovery is considered somewhat long in the threatened economies in Europe, Asia and parts of Latin America are believed to be in the early stages of a revival. In the first quarter, demand, measured in freight ton-kilometers, rose 11 percent year-over-year. In April, freight ton-kilometers rose 8.5 percent from 2016 levels.
International Air Transport Association (IATA) says global air cargo traffic to grow well ahead of earlier forecasts. Growth rate of 7.5 percent outstrip original forecast by 4 percentage points. The projections were issued at the group’s annual meeting in Cancun, Mexico. At the meeting, IATA raised its profit outlook for the entire airline industry, projecting a $31.4 billion profit, up from the $29.8 billion prior forecast, on revenue of $743 billion, up from $736 billion.
IATA Director General and CEO Alexandre de Juniac said air cargo has been in a “coma” for the past six years. IATA’s 275 airline members adopted a resolution to accelerate the modernization of cargo systems and processes in the wake of the signing of the World Trade Organization’s Trade Facilitation Agreement (TFA).
IATA said would contribute $1 trillion in trade to the global economy. The four-part resolution calls for IATA to complete the multi-year task of converting information to digital formats so it can be shared instantly. Also, adopt harmonized standards that support safe and secure operations; use improved technology that allows customers the flexibility to make changes to their shipping flows and develop advanced analytics that could improve the industry’s overall performance.
TFA, the first multilateral agreement in the WTO’s 21-year history, is expected to reduce WTO members’ trade costs by an average of 14.3 percent, with developing countries reaping most of the gains, according to a 2015 WTO forecast. The compact will cut 36 hours off the average time required to import goods, and two days off average export delivery times, both significant reductions from current levels, the report projected.
The International Air Transport Association (IATA) released data for global air freight markets showing that demand, measured in freight ton kilometers (FTKs), and rose 6.9 percent in January 2017 compared to the year-earlier period. This was down from the 10 percent annual growth recorded in December 2016 it still was well above the average annual growth rate of 3 percent over the past five years.
Growth in freight capacity, measured in available freight ton kilometers (AFTKs), slowed to 3.5 percent in January 2017. The continued positive momentum in freight growth into 2017 coincides with a steady rise in new export orders, which reached their highest level in February (latest data available) since March 2011. There has also been an increase in the shipment of silicon materials typically used in high-value consumer electronics shipped by air.
The timing of the Lunar New Year (in January 2017) also may have contributed to higher demand in January. “It’s been a good start to the year for air cargo. Demand growth accelerated in January, bolstered by strengthening export orders. It outpaced the capacity growth which should be positive for yields.”
Longer-term, the entry into force of the Trade Facilitation Agreement (TFA) will cut red tape at the borders for faster, cheaper and easier trade. The onus is now on the industry to seize the opportunity to accelerate the modernization of processes to make air cargo an even more compelling option for shippers,” said Alexandre de Juniac, IATA’s Director General and CEO.
All regions, with the exception of Latin America, reported an increase in demand in January 2017.
Asia-Pacific airlines saw demand in freight volumes grow 6.0 percent in January 2017 and capacity increase by 6.6 percent compared to the same period in 2016.
Seasonally-adjusted volumes were up considerably since early-2016 and are now back to the levels reached in 2010 during the post-global financial crisis bounce-back. The increase in demand is captured in the positive outlook from business surveys in the region.
China’s Purchasing Managers Index (PMI) rose to a 21-month high, Japan’s PMI to a 36-month high, while Taiwan, Korea, and Vietnam also reported increases in new export orders. North American airlines’ freight volumes expanded 6.1 percent in January 2017 year-on-year, as capacity increased 0.6 percent. International freight volumes grew by 8.7 percent. Their fastest pace since the US seaports disruption boosted demand in February 2015. The strength of the US dollar continued to pump up the inbound market but kept the export market under pressure.
European airlines posted an 8.7 percent increase in freight volumes in January 2017. Capacity increased 3.3 percent. The strong European performance corresponds with an increase in reported new export orders, particularly in Germany over the last few months. It was also helped in part by the ongoing weakness in the Eurozone.
Middle Eastern carriers’ freight volumes increased 8.4 percent year-on-year in January 2017 and capacity increased 3.3 percent. Seasonally adjusted freight volumes continued to trend upwards during the first month of the year supported by an increase between the Middle East and Europe.
Despite this, growth has eased from the double-digit rates which were the norm over the past ten years. This corresponds with a slowdown in network expansion by the region’s major carriers.
Latin American airlines experienced a demand contraction of 4.1 percent in January 2017 compared to the same period in 2016 and a decrease in capacity of 1.4 percent.
Recovery in the seasonally-adjusted volumes also stalled with demand 13 percent lower than at the peak in 2014.
The region continues to be blighted by weak economic and political conditions.
African carriers’ saw freight demand increase by 24.3 percent in January 2017 compared to the same month last year, helped by very strong growth on the trade lanes to and from Asia.
Demand between the two continents jumped by 57 percent in January on the back of rapid long-haul expansion and increased direct services.
The increase in demand has helped the region’s seasonally adjusted load factor to rise after falling by five percentage points in 2016 compared to the previous year.
Growth in air freight demand in 2017 may exceed the current forecast of 7.5 percent, the International Air Transport Association (IATA) said after reporting double-digit growth for the fourth month in a row in August.
Demand for global air freight, measured in freight tonne kilometers, rose 12.1 percent in August, driven by a rise in global trade.
Capacity rose more slowly at 4.7 percent, helping to boost the industry-wide load factor, IATA said.
“The current IATA forecast of 7.5 percent growth in air freight demand for 2017 appears to have significant upside potential even if we are approaching a cyclical peak,” the industry body said in a statement.