October demand growth strongest in years

The 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:

 

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