Demand growth continues in September

IATA September 2014 summaryThe International Air Transport Association released its air freight market analysis for September 2014, showing an overall 5.2% year-over-year increase in worldwide cargo traffic. The growth came from a 5.1% increase in international traffic and a 5.7% increase in domestic traffic.

For the first three quarters of 2014, IATA reported total cargo traffic worldwide up 4.4%. The rate of growth in September  was almost the same as the 5.1% y-o-y gain IATA reported in August, and higher than the average for the year to date, but IATA sounded a cautionary note for the rest of the year, saying: “The outlook for air freight volumes has started to look better again for some regions, but the extent of future gains could be limited. Latest trade data show volumes are expanding at a stronger rate than earlier in the year, but still at a slower pace than global economic growth. Business confidence indicates slightly stronger global growth when compared to levels in Q1, but improvements have stagnated again due to the presence of political and economic risks.”

We also note that data gathered by Netherlands-based WorldACD have indicated somewhat stronger growth so far this year than what is being shown by IATA. As shown in the chart at right, WorldACD  found air freight demand in September to be up 6.6%, compared to IATA’s 5.2%, although yields were down slighly. However, the gap between the growth reported by the two organizations has been steadily shrinking since early in the second quarter, and may now simply be a result of the fact that the IATA and WorldACD  collect data in different ways. IATA gathers reports of cargo traffic (in revenue tonne kilometers flown) from member airlines, while WorldACD gathers cargo volume data (in tonnes) directly from the airwaybills of over fifty carriers. Turning back to IATA’s report, we look at the August results by geographic region:

Middle East: Carriers from the Middle East have reported stronger growth than carriers from any other region for several years now, but the difference this month is startling, with Middle East-based airlines seeing a 17% y-o-y increase in cargo traffic. IATA said the big increase was driven by the region’s carriers “capturing opportunities for growth by introducing services to regions of strong and developing trade activity, including Africa and Central America.” Middle Eastern carriers have also increased their focus on perishables, linking producers in Africa with consumers in Asia.

Asia-Pacific: Since the beginning of 2014, airlines based in the Asia-Pacific region have shown positive growth, reversing a several-year trend of declines. The pattern continued in September, with carriers reporting cargo traffic up 5.7%, as trade volumes increased in the region’s emerging economies, and, of course, with the release of the iPhone 6 providing a significant boost in ex-Asia traffic. Given that Asia Pacific carriers account for about 40% of global cargo traffic, the growth they are reporting is providing a solid boost to the worldwide total. IATA was fairly positive in its outlook for the region, saying: “Recent results of purchasing manager surveys (Markit) indicate gains in business activity in the manufacturing sector and a notable rise in export orders. This should help sustain positive trade momentum in the region, which in turn ought to continue driving demand for air freight services on local carriers.”

Europe: The recovery of the European economy has reversed, with the Russia-Ukraine crisis and ensuing EU sanctions, dampening trade. Add to this the two-week strike that hit Air France-KLM in September, and IAG’s abandonment of freighter operations earlier this year, and it is no surprise that European carriers as a group swung to negative growth, reporting traffic down 1.6% y-o-y.

North America: After a weak start to the year, carriers in this region have begun to see strong growth, with a 5.4% y-o-y increase in September following similar results in July and August. Looking ahead, IATA repeated what it said last month: “Latest data show a rebound in trade volumes and underlying growth trends in business activity are positive, which should provide some support for stronger growth in trade and air freight demand ahead”

Latin America:  Trade in the Latin American region deteriorated in the early part of this year, and this curtailed air freight demand for the region’s carriers. After a brief spike in June and July, the region has returned to its earlier trend of low or no growth, with carriers reporting September traffic up just 0.3%. However, the overall picture hides the fact that much of the region’s cargo is flown by carriers owned by two companies – LATAM and Avianca. The LATAM group reported its September cargo traffic down 3.2% in September, so we expect that when Avianca reports traffic for its subsidiary carriers, the results will be quite strong.

Africa: Air freight demand in Africa remains volatile, with cargo traffic growing in one month and declining the next. In September cargo traffic for the region’s carriers was up 11.5% y-o-y, and this follows a 9.2% gain in August. Despite the results in these two months, IATA still has a mixed outlook for the region, saying that while the South African economy – the region’s largest – has pulled back from the brink of recession, “regional trade volumes are yet to show consistent improvement.

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