Air cargo demand, yield growth to continue into Q1 2018, IATA says

This year, as most air logistics people already know, was wildly successful in terms of demand growth. But the expected return to reality, according to the International Air Transport Association (IATA), may not come for at least another quarter into the new year, due to continued strong economic and trade conditions and a sharp rise in consumer confidence.

In the most recent quarterly “Cargo Market Analysis,” IATA said freight tonne kilometres (FTKs) worldwide grew by a strong 8.8 percent, year-over-year, in the three months ended Oct. 31, 2017, adding that other industry reports predicted a strong demand increase in the final three months of the year, as well.

For the first quarter of 2018, IATA predicted that, “even as the boost to air freight from the inventory cycle wanes,” business surveys consistently reported that annual FTK growth should reach a healthy rate of just under 7 percent for the first three months of 2018.

“More favorable supply-and-demand dynamics have helped to drive cargo yields upwards, and to offset some pressure from rising fuel costs,” the IATA report found. Cargo yields, the association said, rose by 13.1 percent, year-over-year, in October 2017, representing the fastest pace seen in the last seven years.

“Meanwhile, freighter utilization is currently back at levels last seen in 2012,” IATA conadding that increased utilization “will help to further reduce unit costs, and to reinforce the backdrop for financial performance.”

Annual growth in freight volumes, the group said, remain “robust on all of the major international market segments,” in the range of 10 to 15 percent, y-o-y. “There are further signs that the current FTK growth cycle peaked earlier in 2017, having been bolstered by the inventory re-stocking cycle. Nonetheless, the ongoing upturns in global economic and trade conditions, not least the strong gains in consumer confidence, are expected to remain supportive of air freight demand in the near term.”

Air carriers worldwide added about 11,600 tonnes of cargo payload capacity in 2017, mostly in the form of belly space, which was 10 percent less additional capacity than the previous year. “The amount of cargo payload added from deliveries of freighter aircraft was the lowest since 2008, around 30 percent below that seen last year,” IATA said.

Heads of cargo, IATA added,  are increasingly upbeat over yields. “When surveyed in early October, nearly three-quarters of airline heads of cargo expected volumes to rise over the next 12 months. The survey respondents were also increasingly confident about the outlook for yields over the period,” the report found.