Solid demand growth continues in November

The International Air Transport Association released its air freight market analysis for November 2016, showing a 6.8% 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 November result is down from the 9.2% y-o-y gain it reported in October, but in line with our prediction three weeks ago that we would see growth of about 7% in worldwide air freight demand for the month. IATA’s 6.8% increase in cargo traffic in November is also in line with data published last week by WorldACD, showing a 6.9% increase in cargo volume (measured in chargeable weight).

IATA said the November gain “coincided with a steady and ongoing rise in the new export orders component of the global purchasing managers’ index (PMI) over the same period,” suggesting “that air freight will carry moderate momentum into the first half of 2017.”

However, IATA also points out that the growth in air freight demand is outperforming growth in overall world trade, so what is driving this growth? IATA points to several factors, including:

• Increasing demand for semi-conductor materials. These shipments generally move by air.

• The increasing popularity of the Black Friday, Cyber Monday, and 11/11 online sales events has driven up demand for consumer electronics – another commodity generally shipped by air.

Of course, IATA would not be IATA if it did not include a note of caution – in this case pointing out that “wider weakness in world trade remains an ongoing concern.” To which we would add our own cautionary note regarding an increase in protectionist sentiment in the US and Europe. Whether, and to what extent, this sentiment will impact demand for air freight remains to be seen.

Also of interest in IATA’s data is the continuation of the trend of strong demand growth for carriers based in Europe. November is the fifth consecutive month in which European carriers have reported the strongest growth among the major regions – a position long held by carriers based in the Middle East. While the big gainers in Europe over the last few years have been Turkish Airlines and AirBridgeCargo (both up more than 20% in 2016 over 2015) recent months have seen a turnaround in the cargo business at Lufthansa and IAG.

It is tempting to attribute this to the weakness of the Euro, but while that weakness may drive growth in exports, it has a counterbalancing negative effect on imports.

And finally, while European carriers may currently be reporting the strongest growth, carriers in all the major regions are saw strong year-over-year gains: 7.8% in the Middle East, 6.1% in the Asia-Pacific, and 5.6% in North America.

The strongest demand growth of all in November was for African carriers (up 10.9%), while the weakest was for Latin American carriers (down 1.3%). But African carriers move only 1.6% of the world’s cargo and Latin American carriers only 3.0%, so their results have little impact on the worldwide total.