Demand trends — are we moving to a “new normal”?

In this week’s issue of Cargo Facts Update we reported the latest traffic summary from the International Air Transport Association. IATA’s data showed that total worldwide air cargo traffic in June was down 3.0% compared to June 2010. While our report was perfectly correct — IATA did report a 3.0% decline — I’d like to explore it further here, and to hear your thoughts on both current and longer-term trends.

 

As we have often pointed out, no one — not IATA, not Boeing nor Airbus, nor any government department — can provide perfectly accurate air cargo traffic data, and the 3.0% year-over-year decline reported by IATA for June (and the 1.2% increase for the first half of this year) must be taken with a certain amount of skepticism. However, even if the IATA report is somehow perfectly accurate, it means relatively little on its own. A decline of 3.0% sounds bad, right? But wait. In June 2010, IATA said air cargo traffic was up 26.5% y-o-y, so this year’s 3% decline is actually close to a 23% gain when compared to two years ago. So that must be good, right? Well, not necessarily, because traffic had dropped off a cliff in late 2008, and was still showing huge year-over-year declines in June 2009. 

 

Obviously, traffic data for any given month has limited value. Limited by its own accuracy, and also by the fact that as a snapshot taken out of context, it can easily be misinterpreted. This is not to say it is meaningless, but rather that one has to be very careful about the conclusions one draws from it.

 

So if monthly year-over-year data are suspect, what can we say about longer-term trend analyses? If I look only at data published by IATA, for example, I can conclude that over the last seven years, air cargo traffic has increased at an annual rate of 2.6%. But it doesn’t take much thought to realize that this, too, is suspect. Change the beginning or end year, and the rate changes. Look closely at the data from the earlier years and you realize that they were gathered differently. Compare IATA’s numbers to those generated by other organizations or companies (ACI, for instance, or Boeing) and you sometimes wonder if they are reporting traffic on different planets.

 

But while any given data set can be questioned, two things are clear: First, demand for air freight has been much more volatile in recent years than at any time previous. And second, even though one can’t be perfectly sure of the annualized growth rate over the last decade, it is certainly lower than the traditionally 6%. So, is increased volatility and a lower overall growth rate the new normal? Or will the air freight business soon return to the old pattern of steadier demand growth at a rate close to the historic 6%? 

 

Let us know your thoughts.

 

 

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