2015: The results are in

IATA December 2015 summaryThe International Air Transport Association released its air freight market analysis for December 2015, showing a slight (0.8%) year-over-year increase in worldwide cargo traffic (in freight tonne kilometers flown). This 0.8% overall gain was the result of a 0.7% increase in international traffic and a 1.4% increase in domestic traffic.

For the full year 2015, IATA said worldwide air cargo traffic was up 2.2%, led by 2.5% growth in international traffic, while domestic traffic was almost flat (up just 0.1%) with 2014.

Two weeks ago, when we looked at December cargo data from some of the world’s major carriers, airports, and handlers, we predicted that IATA and WorldACD would report very low single digit y-o-y growth for both the month and the full year. So IATA’s report of a 0.8% y-o-y increase in December traffic and 2.2% for the year, was about what we expected. For its part, World ACD reported December cargo volume (measured by chargeable weight) up 2.1% y-o-y, and full-year volume up 2.0%. Again, in line with our expectation.

In the first two months of last year, 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, overall traffic was up 7.5%, but since then it has become obvious that underlying growth in air freight traffic is fairly weak. Putting the IATA year-over-year cargo traffic results in list form gives a fairly clear picture of air freight demand growth for the year:

What this shows is remarkable consistency in demand growth in 2015, with no big swings either way once the impact of the port slowdown and automotive recall were washed out. Not a great year, but, given the state of the economy in China, Europe, and Latin America; and the political instability in the Middle East and Ukraine; not a bad one, either.

As we and others have pointed out many times in the last few years, the days of air freight demand growing at twice the rate of worldwide economic growth are over. IATA also makes this point in its comments about the December and full-year results, saying: “We have to adjust to the ‘new normal’ of cargo growing in line with general rates of economic expansion.”

Emirates, and its fellow Middle East-based carriers are still carrying plenty of cargo, but their days of 15% y-o-y growth are likely over.

Turning from overall results to regional results, what jumped out at us on our first look at the IATA data was the slowdown in year-over-year traffic growth reported by carriers in the Middle East. While the 4.0% increase in December was a better performance than seen in any other region, it is a significant drop from the strong double-digit increases we have seen in the region for many years. Again, putting the year-over-year results in a list gives a clear indication of the trend of declining growth in air freight demand reported by Middle East-based carriers:

However, rather than taking this as evidence of a looming air freight catastrophe for Middle East-based carriers, remember that no carrier can maintain 15% and 20% y-o-y growth for more than a few years. There is only a limited amount of cargo in the world, and if you extrapolate double-digit growth for any given airline, it doesn’t take long until your chart shows that airline carrying the entire volume of world cargo. So, while there will no doubt be months in 2016 when Middle East-based carriers show growth at rates greater than low-to-mid single digits, their days of endless double-digit growth are over.

Looking ahead, IATA was (sensibly, we think) non-committal about prospects for 2016, saying: “The outlook for air freight and world trade remains fragile, but there are now some more signs that earlier declines in FTKs have bottomed out. Indicators in the Eurozone are looking better and globally, export orders have improved slightly. That said, it is too early to know whether this cautiously positive development will be sustained, as the global economy remains fragile.”

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