April air freight growth: has acceleration peaked?

Two weeks ago, when we looked at the first April data coming in from some of the world’s big cargo carriers and airports, we predicted that when WorldACD and IATA published their detailed analyses at the end of the month, they would show worldwide air freight demand growth of close to 10%.

Month-end is now upon us, and our prediction was close to the mark. Depending on the way demand is measured, WorldACD and IATA reported year-over-year growth of between 7.7% and 8.5%. And, according to IATA, international cargo traffic (which accounts for 87% of all cargo traffic) was up 9.8%

IATA’s analysis focuses on cargo traffic. That is, revenue tonne kilometers flown (RTKs). As can be seen in the chart, carriers in the three main geographic regions reported strong growth in international traffic, led by 13.1% growth by European carriers, with North American carriers reporting international traffic up 12.5% and Asian carriers showing a 9.4% gain. However, total traffic growth was held back to 8.5% by slower growth in the Middle East and in the domestic market in North America – although, a 7.3% y-o-y increase is pretty good for “slower growth.”

The strongest growth was reported by African carriers, but since they account for only 1.6% of the world’s total cargo traffic, their almost-30% increase had little impact on the overall total. Likewise, the falling demand reported by Latin American carriers does not have much effect on the total, because they account for only 2.8% of worldwide traffic.

And a final note on the IATA summary is that carriers based in the Middle East – carriers which once could be counted on to report the biggest demand increases – are now lagging their European, American, and Asian competitors.

WorldACD measures air freight demand two ways: by volume (chargeable weight carried), and by direct tonne kilometers (DTKs – a measure combining weight with direct distance between origin and destination).

In volume terms, WorldACD reported April demand up  7.7% y-o-y. The company noted, however, that the timing of the Easter holiday shifted traffic that would normally have flown in April to March. This was particularly noticeable in Europe where outbound volumes were up 19% y-o-y in March, but only up 5% in April. Adjusted for this calendar disruption, European carriers’ volumes are still up nearly 9% year-to-date, over the same period in 2016.

In DTK terms, WorldACD reported total traffic worldwide up 8.5% – the same growth rate reported by IATA.

Looking ahead, although IATA expects solid demand growth for the remainder of 2Q17, the organization believes however, that growth rate acceleration may have peaked in March. Demand for air freight often surges during periods of economic upturn, as sales outpace inventories. IATA noted that the inventories-to-sales ratio already stopped falling, suggesting that inventories have readjusted to current demand levels. Still, IATA has revised its air cargo demand growth forecast upward, and now expects a full-year growth rate of 7.5%, supported by “strong pharmaceuticals and e-commerce.” Summing up the first four months of 2017, IATA’s Director General and CEO Alexandre de Juniac said, “Demand eased in April. Growth rates, however, are still much more robust than anything we have seen in the last six years.”