Strong demand growth in August – but tougher comparisons ahead

Two weeks ago, we predicted that when worldwide data were available for August, we would see a year-over-year increase in air freight demand well into double digits. Both WorldACD and IATA have published their August analyses, and, as you can see in the charts at right, demand did indeed grow between 12% and 15% y-o-y, depending on whether it was measured in freight tonne kilometers flown (12.1%), chargeable weight (12.9%), or direct tonne kilometers flown (14.6%).

This is, needless to say, great news for the air freight industry. But, as has been the case almost since the beginning of this year, it raises the question: “How long can the good times last?”

The answer, of course, is: “It depends.” The usual caveats apply – growth is tied to world trade, politics, economic cycles, and other external factors, and changes in any of those can impact growth. But in this case, it also depends on what you mean by “the good times.”

If you mean double-digit year-over-year growth, then we expect the good times are coming to an end. On the other hand, if you mean strong demand and healthy yields, then the good times may roll on for quite a while.

Looking back at 2016, air freight demand growth was negative at the beginning of the year, turning positive in April, with low single-digit year-over-year gains through August. But in September, growth began to accelerate, up 6.1% in that month, and then 8.2%, 6.8%, and 9.8% in October, November, and December, respectively.

So, as we proceed through the last four months of 2017, the year-over-year comparisons will be increasingly tough, and even if demand continues to be strong, the y-o-y percentage gains will be smaller.

September data will begin to show up in the next few days, and while we don’t expect to see a huge drop-off in year-over-year growth, we do expect to see the beginning of a gradual decline. And then, by year-end and early 2018, the year-over-year data will be more indicative of long-term growth patterns.