The International Air Transport Association today released its first air freight market analysis for 2014, showing a solid 4.5% increase in total traffic worldwide compared to January 2013. This increase was driven almost entirely by growth in international traffic (up 5.2%), while domestic traffic was effectively flat with last year (up just 0.3%).
The overall tone of the IATA analysis was strongly positive, but before looking at it in detail, we point out that the timing of the Asian New Year holiday (it can fall in either January or February), has a big effect on freight traffic, as factories in China close for as much as two weeks. So, while we agree that results from January likely do indicate a continuation of the growth seen in the fourth quarter of 2013, it is the combined January/February result that will tell the real story.
However, IATA points out that early reports for February point to a continuation of the rebound, so we are unlikely to see a repeat of 2013, when traffic surged wildly in January, and then dropped equally wildly in February. Assuming that the February numbers do no show any big New Year-influenced drop, then the growth trend in air freight volumes that has shown steady improvement since the second quarter of 2013 looks as though it might indicate a real recovery. And worthy of note is that carriers from all regions are sharing in the growth – some more than others, but January traffic was up year-over-year in each of the major geographic regions.
Middle East: As has been the case for the last few years, carriers from the Middle East are leading the way, with cargo traffic up over 10%. The massive expansion of the long-haul fleets of the four big carriers from the Gulf Region – Emirates, Etihad, Qatar, and Saudia – combined with the strategic location of their hubs, has allowed them to take a rapidly-increasing share of the traffic flowing on all the major trade lanes connecting Europe, Asia, Africa, and the CIS. Emirates, which has reached the point of being one of the biggest international cargo carriers in the world, is no longer seeing the huge y-o-y increases that it once did, but the other carriers are still growing rapidly.
Asia-Pacific: Airlines based in the Asia-Pacific region have long carried the biggest share of global cargo traffic (about 40%), and they continue to do so. They face ever-increasing competition on the Asia-Europe trade lane (and the increasingly important Asia-Africa lane) from carriers based in the Middle East, but in January they reversed a long trend of declines, reporting traffic up 3.8% y-o-y. This reflects increasing demand for Asian manufactured goods in Europe and North America, but IATA notes that there is potential for a slowdown in China’s economy this year, which could dampen demand for air freight.
Europe: Several years of political uncertainty and economic woes made the outlook for Europe at the beginning of 2013 uncertain, but the European economy gradually improved throughout the year, and the improvement is accelerating into 2014. Not surprisingly, this has boosted air freight demand, and European carriers reported strong traffic growth in January – up 6.0% y-o-y. IATA notes that indicators of business activity in the Eurozone (measured by JPMorgan/Markit) show the strongest rates of increase in January for the past two and a half years, which bodes well for the remainder of the year.
North America: Carriers in this region have cut capacity, and reported the smallest increase of any geographic region – up just 0.7%. However, according to IATA, early indicators for February point to a strong rebound. If that pick-up materializes, growth in the manufacturing sector, coupled with increases in export orders could provide a stronger base for air freight demand going forward.
Latin America: LATAM, the region’s biggest carrier, reported cargo traffic up just 0.9% in January, so the overall 8.3% growth in the region indicates exceptionally strong performance by carriers like Avianca (which includes the former Tampa Cargo) and some of the smaller all-cargo operators.
Africa: After reporting solid growth in the first half of 2013, African carriers saw their cargo traffic decline through most of the second half. However, the year ended on a positive note with a 1.7% gain in December, and that growth has strengthened in January with traffic up 4.1%.