The International Air Transport Association released its air freight market analysis for October 2014, showing an overall 5.4% year-over-year increase in worldwide cargo traffic. The growth was driven by a 5.6% increase in international traffic, while domestic traffic was up just 3.9%. For the first ten months of 2014, IATA reported total cargo traffic worldwide up 4.5%.
The rate of growth in October follows the pattern established in October 2013 when a long-standing trend of decline was reversed. Since then, IATA has reported year-over-year growth each month of between about 3% and 6%, and this month, for the first time, sounded fairly optimistic that growth would continue. “The good results reflect the improvements in world trade and business activity which have been evident since the summer. World trade is growing steadily, supporting increased air cargo shipments. We are now back to levels of demand not seen since the 2010 post-recession bounce-back.”
Of course, IATA wouldn’t be IATA unless it managed to inject at least a hint of caution, and this month that hint concerned the need for the air freight industry to keep up with its surface competitors. IATA boss Tony Tyler said that despite the gains over the past year, “the industry is still in the hot seat and under pressure to improve its value offering. Customer expectations have evolved dramatically. Other modes of cargo have improved their competitiveness. Shippers expect the efficiency of electronic processes that they experience in almost every other sector. And when shipping specialty products – such as those requiring cold chain control – they expect quality from end-to-end.”
Looking at IATA’s analysis on a regional basis:
Middle East: Carriers from the Middle East have reported stronger growth than carriers from any other region for several years now, and that pattern continued in October, with Middle East-based airlines seeing a 13% y-o-y increase in cargo traffic. IATA said the October increase, like the even stronger jump in September, 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 new trend of growth strengthened in October, with carriers reporting cargo traffic up 6.7%, as trade volumes increased in the region’s emerging economies, and, of course, with the release of the iPhone 6 continuing to provide 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, but IATA did sound a cautionary note, saying: “latest indicators for business activity in China show that manufacturing and services growth is slowing, as are new export orders, which could dampen regional trade activity.”
Europe: The European economy was on the verge of recession in the third quarter of 2014, with the Russia-Ukraine crisis, and ensuing EU sanctions, dampening trade. However, the region’s carriers nonetheless reversed September’s decline in air freight traffic, reporting a year-over-year gain of 1.4% in October. Looking ahead, IATA predicted that “poor business confidence and the ongoing sanctions against Russia will continue to weigh on European cargo in the months ahead.”
North America: After a weak start to the year, carriers in this region returned to solid growth in July, August, and September. This growth continued in October, although at 3.1%, rather than the 5% to 7% levels of the previous three months. Regarding prospects for the coming months, IATA said “Latest data show strong gains in US trade volumes and underlying growth trends in business activity are positive, which should provide some support for solid growth in 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 briefly returned to its earlier trend of low or no growth, but that changed in October when Latin American carriers reported their cargo traffic up 4.1% y-o-y. Much of the region’s cargo is flown by carriers owned by two companies – LATAM and Avianca. The LATAM group reported its October cargo traffic up just 1.5% in October, so we expect that when Avianca reports traffic for its subsidiary carriers, the results will be very strong.
Africa: Air freight demand in Africa was volatile through the first eight months of 2014, with cargo traffic growing in one month and declining the next, but the 9.6% gain the region’s carriers reported in October follows gains of 9.2% and 11.5% and in August and September. Whether this trend of strong demand growth will continue is still unclear, but IATA points out that the South African economy – the region’s largest – has begun growing again after almost falling into recession in the second quarter.