2016 Air freight market outperformed expectations

IATA December 2016 stats with LF v2The International Air Transport Association released its air freight market analysis for December 2016, showing a 9.8% year-over-year increase in worldwide cargo traffic (in freight tonne kilometers flown). International cargo traffic, which accounts for 87% of total traffic, was up 11%.

The IATA December result was the highest gain recorded in 2016 (greater than the 9.2% y-o-y gain reported in October), and outpaced the boost in February 2015 resulting from the US west coast port disruptions.

Data from Netherlands-based WorldACD closely paralleled IATA’s December results (see chart below), reporting worldwide chargeable weight up a “friendly” 9.4% y-o-y, as USD revenues grew 4.5%. Looking at direct-tonne-kilometers (the product of weight carried, multiplied by the direct-flight distance between origin and destination) rather than chargeable weight reveals even higher growth. DTKs rose 10.3% y-o-y, in December.WorldACD December 2016

Looking at the year 2016 as a whole, IATA measured a 3.8% increase in overall FTKs while WorldACD reported chargeable weight up 3.1%, and DTKs higher over 2015, by 3.4%. Both figures were higher than the 2-3% growth IATA had been expecting at the onset of the year.

Traffic reported by European carriers grew faster than carriers from any other market in 2016, with FTK growth of 7.6% compared to 2015, thus accounting for about half of the industry’s overall traffic growth in 2016.  There is currently some debate as to whether air cargo’s recent momentum will continue, or if it is a “potential false dawn” as IATA called it.

Optimists may choose to lean on sustained growth in pharmaceutical and cross-border e-commerce verticals for continued air freight momentum. After all, these verticals, combined with “a strong peak season, an increase in the shipment of silicon materials, and a turnaround in new export orders” pushed demand higher in 2016, according to IATA.

Pessimists meanwhile, may fear the implications of protectionist macroeconomic policies, and slowing global trade. “Governments must not forget that trade is a powerful tool for growth and prosperity,” said IATA’s director general and CEO, Alexandre de Juniac.

Returning to IATA’s December data, the figures highlighted the continuation of some of the trends witnessed throughout the second half of 2016 – foremost of which, the strong demand growth for carriers based in Europe which reported FTKs up a whopping 16.4% y-o-y. December was the sixth consecutive month in which European carriers reported the strongest growth among the major regions – a position long held by carriers based in the Middle East. While the big gainers in Europe over the last few years have been Turkish Airlines and AirBridgeCargo (both up more than 20% in 2016 over 2015) recent months have seen a turnaround in the cargo business at Lufthansa and IAG.

While European carriers may currently be reporting the strongest growth, carriers in all but one region saw year-over-year gains: 14.5% in Africa, 11.2% in the Middle East, 9.8% in Asia-Pacific, and 3.7% in North America. Latin America was the only region where traffic declined (down -1.0%), but even so, this was an improvement over the 5% to 6% declines throughout most of the year.

Finally, WorldACD published a few interesting yield developments based on data it collects from millions of transactions conducted by more than 60 airlines and thousands of freight forwarders, moving cargo between more than 200,000 origins and destinations. Between 2015 and 2016, WorldACD noted:

  • On westbound lanes (Asia Pacific to Europe, Asia Pacific to MESA, MESA to Europe, MESA to North America, Europe to North America, and North America to Asia Pacific) the weighted average yield (including surcharges) fell from US$2.00 to $1.75, a drop of 12.5%;
  • On the same lanes, but now in the easterly direction, yield dropped by 15.5%, from US$1.93 to $1.63;
  • The directional difference in yields dropped to US$0.63 US between Asia Pacific and Europe (the westbound yield being the higher one), and to $0.94 USD between Asia Pacific and North America (eastbound higher). The gap increased to $0.49 between Europe and North America (westbound higher);
  • The largest percentage drop between 2015 and 2016 came in the market from North America to Europe (-19%), whilst yield dropped least in the market from Europe to Asia Pacific (-10%).

 

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