Traffic growth slows in June

The International Air Transport Association released its air freight market analysis for June 2015, showing an overall 1.2% year-over-year increase in worldwide cargo traffic (in freight tonne kilometers flown). On a regional basis, results varied from a 3.3% y-o-y decline in traffic reported by North American carriers, to a 15.3% gain for carriers in the Middle East. Interestingly, this is a far smaller spread than we saw in May, when Latin American carriers’ traffic declined 10.5% while Middle Eastern carriers reported an 18.1% increase.

The overall 1.2% gain in June was driven by a 1.4% increase in international traffic, while domestic traffic in the month was flat with June 2014.

For the first half of 2015, IATA said worldwide air cargo traffic was up 3.5%, led by 3.9% growth in international traffic, while domestic traffic was up just 0.7%. The bulk of this growth came in the first two months, when labor strife at the US West Coast ports, and a massive automobile recall in the US drove shippers to shift goods from ocean to air, but as the impact of those events faded, it became clear that underlying growth in air freight traffic was fairly weak.

However, as IATA points out, even this low growth figure is misleading, because there has actually been a slight decline in traffic since the end of 2014. “Although year-on-year comparisons remain positive (albeit weakening), they are being supported by growth that took place last year, rather than additional gains in 2015.”

So, as we move into the second half of this year, does the strong growth of the second half of 2014 mean that we will start to see negative year-over-year growth in coming months? IATA says maybe not. The low growth rate so far this year has mirrored declines in trade activity resulting from a combination of weaker-than-expected global economic growth, particularly in the US and emerging markets. But, looking ahead, IATA says “we are sticking with our view that economic growth and trade will accelerate in the second half of the year, strengthening growth in air cargo volumes.”

Also worth noting is that IATA’s snapshot of 1.2% growth in June is not matched by data just released by WorldACD, showing June cargo volume (measured by chargeable weight) up 2.6%. Admittedly, this is not a heartening figure, but it is nonetheless over twice the growth rate shown by IATA.  The WorldACD data also show a 16.0% y-o-y drop in yield in June, continuing a trend of steadily worsening yields that began in October last year.

Regarding yields, while the 16.0% decline sounds serious, WorldACD did point out that “yield excluding charges stood its ground.”

Our own view is not much changed from last month, when we said that for air cargo demand, much hinges on Europe. The rest of the world’s major economic regions, perhaps excepting Latin America, seem reasonably healthy, but until European companies and consumers are confident that problems in Greece can be resolved in a way that limits damage to the rest of the Eurozone, growth will remain stalled.