March cargo traffic – inconclusive evidence

The International Air Transport Association released its air freight market analysis for March 2015, showing an overall 1.6% year-over-year increase in worldwide cargo traffic. On a regional basis, however, results varied from a 6.4% decline in traffic reported by carriers in Latin America to a 10.6% increase for carriers based in the Middle East. International traffic was up 1.7% overall, while domestic traffic in March rose 0.9%.

As we have reported, year-over-year changes in cargo traffic in January and February were heavily impacted by several unique factors in 2015. As always, the timing of the Lunar New Year holiday in Asia rendered data for the individual months of January and February suspect, but this year also saw substantial backlogs build at US West Coast ocean ports due to labor strife, while at the same time a massive automobile recall in the US (over defective airbags) caused a tremendous spike in demand for goods from Asia (particularly Japan) to North America.

The timing of the Lunar New Year holiday has no effect on quarter-to-quarter comparisons, so once March data are available we can usually make judgments about underlying trends in air freight demand. However, given the shift to air of a considerable amount of Asia-US cargo in February and March due to the combination of the ocean port backlog and automobile recall, we are not sure what conclusion can be drawn from the fact that IATA reports worldwide air cargo traffic up 5.3% y-o-y in the first quarter.

Absent the strike and recall, would air cargo traffic have been up 2% for the quarter? 3%? 4%? We don’t know. IATA points out that business confidence in March was unchanged from January, but that business confidence for the first quarter of 2015 is up from the second half of 2014. In IATA’s view, this, and other economic factors, indicate that “moderate expansion in air freight is expected to continue, and there is scope for some further gains.” But “moderate expansion” is an imprecise term, and does not say much about what the underlying growth rate would have been, absent the one-time factors.

By this time next week, we will have seen April data from some of the world’s major cargo carriers and airports, but as of today, the only report available comes from Shanghai Pudong International Airport Cargo Terminal Co, Ltd (Pactl, the biggest handler at Shanghai’s Pudong Airport), which reported its April handle up 9.8% y-o-y to 135,000 tonnes.

Make of that what you will. We are going to wait at least another week before attempting to draw any conclusions.