Air cargo closes bleak 2019 in IATA December report

The International Air Transport Association (IATA) released preliminary data for December indicating that total industrywide cargo traffic, measured in freight tonne kilometers (FTKs), has decreased by 2.7% year over year. For the entire year, total industrywide cargo traffic declined 3.3% YoY, making 2019 the first year of declining freight volumes since 2012, and the weakest performance since the global financial crisis in 2009, IATA stated.

Air cargo’s performance in 2019 was dampened by weak growth in global trade of just 0.9%, according to IATA. The sector’s underperformance was also due in particular to slowing GDP growth in manufacturing-intensive economies as well as softer business and waning consumer confidence. However, there are signs that both confidence and orders could pick up in 2020.

One indicator providing signs of stabilization is the new export orders component of the global manufacturing Purchasing Managers’ Index (PMI), which has seen recovery in YoY growth in the past three months. If the historical relationship between air freight demand and PMI growth holds, IATA anticipates air freight to expect improvement in growth during the coming months.

However, it is too early to pinpoint the long-term impact of restrictions associated with combatting the new coronavirus outbreak, IATA said.

“Trade tensions are at the root of the worst year for air cargo since the end of the global financial crisis in 2009,” said Alexandre de Juniac, IATA’s director general and CEO. “While these are easing, there is little relief in that good news as we are in unknown territory, with respect to the eventual impact of the coronavirus on the global economy. With all the restrictions being put in place, it will certainly be a drag on economic growth. And, for sure, 2020 will be another challenging year for the air cargo business.”

Meanwhile, in 2019, industrywide airfreight capacity measured in available freight tonne kilometers (AFTKs), rose 2.8% YoY for the month and 2.1% for the entire year. Capacity growth has now “outstripped” growth in demand for the 20th consecutive month, according to IATA.

As air freight capacity growth remained above demand growth, the industrywide load factor has fallen by a sizeable 2.7 percentage points for December 2019, and 2.6 percentage points for 2019, compared with the same period the prior year.

Freight volumes fell in the single digits across most key regions except Africa. For 2020, industrywide FTKs are forecast to grow by 2.0%, mostly on the back of a recovery in world trade. The health situation in China will also impact forecasts, although at this stage it is impossible to estimate exactly how; the duration and geographic spread of the coronavirus outbreak will be critical to understanding its impact.

Continuing the trend that emerged in mid-2018, Africa topped growth in all regions, with airfreight demand increasing 10.3% YoY in December. Capacity grew 10.0% YoY, despite the small size of the region’s market, which makes up 1.8% of the world’s share of airfreight. Year-to-date, demand and capacity are up by 7.4% YoY and 13.3%, respectively.

Meanwhile, carriers based in Europe, North America, Latin America, the Middle East and Asia saw continued declines in total airfreight demand in the low- to mid-single digits in December and year to date. Only Latin America saw flat growth in total demand in 2019, compared with 2018.

Even with these mixed results, IATA’s report ultimately finds that the airfreight industry may record positive YoY growth rates again in the near future due to improved global relations. IATA also notes, however, that its analysis may change since the December survey was completed prior to the outbreak of the coronavirus, which is now severely impacting global aviation and logistics operations.