Peak season’s weak October start may turn around, IATA reports

In line with reports from WorldACD, airports and carriers worldwide, the International Air Transport Association (IATA) released preliminary data for October indicating total industry wide cargo traffic, measured in freight tonne kilometers (FTKs), decreased by 3.5% year-over-year in October. While this is undoubtedly a slow start to the fourth quarter, IATA said nascent indicators may mean better news for airfreight as it ramps up for its traditional peak season.

Although remaining almost 2% lower than their level in 2018, October’s growth outcome from the new export order component of the global manufacturing Purchasing Managers’ Index (PMI) was the best result since early 2018, according to IATA. Allowing for a lag for production time, the PMI has historically been a reliable leading indicator of freight volumes, which may mean the airfreight industry will see volumes pick up as peak season progresses.

“At the individual country level new export orders remained weak across many of the world’s leading export nations, including Germany, Japan and Korea,” IATA stated. “Cautious signs of improvement were, however, observed in the data for both China and the U.S. in October. This may be a reflection of the thawing in trade negotiations between the two countries.”

Meanwhile, industry-wide airfreight capacity measured in available freight tonne kilometers (AFTKs), rose 2.2% y-o-y for the month and 2.0% for the first ten months of 2019. Capacity growth has now “outstripped” growth in demand for the 18th consecutive month, according to IATA.

Softer demand has dragged load factors down as well, which declined by 2.8 percentage points y-o-y for October 2019, and 2.7 percentage points for the first ten months of 2019, compared to the same period the year prior.

As was the case for September, freight volumes fell across all key regions except for Africa. Regardless of this bleak beginning to the fourth quarter, seasonally adjusted FTKs for several regions continue to trend sideways, evening out the downward trend that took place between third quarter 2018 and first quarter 2019, according to IATA. This paired with growth in several regions’ FTKs and economies suggests there may hope yet for holiday air freight volumes.

Continuing the trend that emerged in mid-2018, Africa topped growth out of all regions with airfreight demand increasing 12.6% y-o-y in October. Capacity grew 13.9% y-o-y, despite the small size of the region’s market, which makes up only 1.6% of the world’s share of airfreight. Year-to-date, demand and capacity are up by 5.7% y-o-y and 13.7%, respectively. According to IATA, this trend is underpinned, in part, by large-scale foreign investment, in particular from Asia, which creates new business and trade opportunities.

Meanwhile, carriers based in North America, Europe, Latin America, the Middle East and Asia all saw declines in total airfreight demand in the low- to mid-single-digits in October. Year-to-date North America, Europe, the Middle East and Asia saw similar declines. Only Latin America saw marginal growth of 0.6% in total demand over the first ten months of 2019, compared to 2018.

However, looking closer, airlines in Europe, the Middle East and North America saw some improvement this month. Some October highlights include 5.6% growth in FTKs flown within the European market, a 1% month-over-month improvement in international FTKs flown by North American carriers, and upward trends in seasonally adjusted volumes for North America and the Middle East.

Even with these mixed results, IATA’s report connotes that air cargo may hope for a brighter end to the year as holiday shopping paired with economic growth in key regions will likely increase traffic across regions over the coming months.