It’s the economy, stupid: Despite growth IATA warns of market fragility

After a weak first quarter, air cargo recovered and grew in the second and third, and is on track to hit year-on-year growth of 6.1 percent in September, measured in freight tonne kilometers (FTKs), IATA said in its Q3 2016 “Cargo Chartbook.” The trade organization anticipates that “moderate pick-up in economic activity is expected in 2017, driven by emerging economies,” which collectively translates into “weak midterm tailwinds for air freight demand growth.

World trade remains fragile, was the organization’s message, and industry stakeholders have raised alarm at the increase in anti-trade rhetoric. IATA now expects global trade to grow slower than GDP, but noted that air cargo outperforms this metric.

The latest capacity numbers indicate that not much has changed on that front. For widebody freighters, capacity has been on an upward trajectory for six consecutive quarters now. Available FTKs grew 4.9 percent in Q3 2016, y-o-y, on par with FTK growth of 5.1 percent.

The increase this time around is due to a reduction of in-storage capacity and deferral in retirements. Continued growth in passenger business exacerbates the situation, and IATA warned that, because of increases in payload belly capacity available on newer jets, “the continued addition of widebody payload belly capacity has had a significant impact on dynamics in the air cargo market.”

IATA’s international freight volume growth by route area show a wide disparity in volume growth along routes. Africa to Europe, for example, is not netting any of the aforementioned growth, continuing its slump with a 6.6 percent y-o-y decline in August. Nigeria’s protracted economic/currency crisis is a factor, and just this week, Emirates became the latest airline to axe Nigeria routes. Iberia and United Airlines recently ceased their Nigeria operations as well.

Africa to the far east (and back), on the other hand, saw a 31.8 percent y-o-y increase over the same month. Other strong performers in August were North/South America to the Southwest Pacific at 25.6 percent, y-o-y – thanks, in part, to growing demand for perishables in China – and “within Europe,” where y-o-y freight volume was up 16.9 percent.