January gains come with an asterisk

Two weeks ago, we looked at the January data available from some of the world’s major cargo carriers and airports. At that time we predicted that once all results were in, it was likely that worldwide air cargo demand for the month would show a modest year-over-year increase. But we also cautioned (as we always do regarding January data) that because of the variable timing of the Chinese New Year holiday, it would not be until February results were available that one could draw any meaningful conclusions about underlying demand growth.

Worldwide data for January, as collected and interpreted by both IATA  and WorldACD, are now available, generally confirming our prediction, although IATA shows total demand growth to be somewhat higher than we expected.

According to IATA, worldwide air freight demand (measured in freight tonne kilometers flown by its member airlines) was up 6.9% y-o-y, led by 8.0% growth in international traffic. This is a drop from the 10% growth in December, but, as shown in the top chart, it is almost double the full year growth in 2016.

Perhaps the most interesting thing about IATA’s January numbers is that carriers from the four geographic areas responsible for over 95% of all cargo flown reported surprisingly similar gains in international traffic – ranging from the 7.5% growth at carriers based in the Asia Pacific region, through 8.5% for both European and Middle Easter carrier, to 8.7% for North American carriers. Latin American carriers continued to report declining cargo traffic, while African carriers saw the opposite result – reporting international traffic up 25.0% and total traffic up 24.3%.

WorldACD reports air freight demand growth in two ways. According to the Netherlands-based company, total cargo volume (measured by chargeable weight flown) was up 4.9% y-o-y in January. And, as shown in the chart below, yield – which has been steadily declining for years – was almost flat with January 2016.

However, WorldACD recently developed a new metric, which it calls direct tonne kilometers, or DTKs. Like the traditional traffic metric of FTKs, DTKs multiplies tonnes carried by distance flown, but whereas the multiplier for FTKs is total distance flown, DTKs are calculated using the distance that would have been flown if the aircraft went directly from origin to destination. This eliminates the inflationary impact of triangular or multi-stop routes on traffic measured in FTKs and is, in our view, probably the best overall indicator of demand growth. For January 2017, WorldACD said worldwide cargo traffic, measured in DTKs was up 6.7% over January 2016.

So what do all these numbers mean? We will have to wait until we have the combined data for January and February to know for sure, but it seems safe to say that things are looking up.