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October demand growth strongest in years

David Harris by David Harris
December 8, 2016
in Capacity & Demand, E-Commerce, News Archives
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iata-october-2016-statsThe International Air Transport Association released its air freight market analysis for October 2016, showing a 9.2% year-over-year increase in worldwide cargo traffic (in freight tonne kilometers flown). International cargo traffic, which accounts for 87% of total traffic, was up 8.2%. The IATA October result is in line with our prediction three weeks ago that we would see growth of over 7% in worldwide air freight demand for the month, up considerably from September’s 6.1%.

IATA calls the October increase the biggest since February 2015, and while this may be technically correct, our view is that, due to the influence of the shifting date of the Lunar New Year holiday in Asia, January and February must be counted as a single month. Looked at in that light, the January/February 2015 traffic growth was 7.5%, and October 2016’s 8.2% year-over-year increase is the biggest since… Well, we’re not sure when traffic grew at a rate higher than that, but probably not since the massive (and short-lived) spike in 2010.

Also worth noting is that demand for air freight in Jan/Feb 2015 was boosted by a combination of labor strife causing huge backlogs at US West Coast ocean ports, and a massive recall of automobile air bags. October 2015 may have seen some boost from the Hanjin bankruptcy, but anecdotal evidence from forwarders and carriers indicates that the Hanjin effect was relatively minor. All of which leaves us with the conclusion that the October demand growth was real. And, based on early reports from a variety of carriers, forwarders, and airports, that growth continued through November, and has carried on into early December, giving us the first old-style peak season in years.

What is driving this growth? IATA points to several factors, including:

  • A weak euro has allowed for a big increase in exports from Europe, particularly from Germany. However, we point out that what the weak euro gives on the export side of trade, the weak euro also takes away on the import side.
  • Stronger cross-border e-commerce traffic. No argument from us on this one. “Global Buy and Global Sell” has become the mantra of not just Alibaba, but of online retail sites everywhere, and this has had a big part in driving “Global Fly.”
  • Stronger international pharmaceutical traffic. Since being publicly chastised by pharma shippers three years ago for its unreliability, the air freight industry has put tremendous effort into creating an unbroken cold chain, and that effort now appears to be bearing fruit.
  • Increasing popularity of Black Friday, Cyber Monday. This is undoubtedly true, and applies also to Singles Day in China. But, like the weak euro, there is a flip side. That is, a sale made during one of these hugely-hyped sales events is a sale not made on some other day. However, at least this year, there does not appear to have been a fall-off in air freight demand following these events, but we will have to wait for December traffic data to be sure about this.

 

Tags: air cargo demandair cargo trafficIATA
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