Last month we predicted that when worldwide data were available for October, we would see a year-over-year increase in air freight demand within mid-single digits. Both WorldACD and IATA have published their October analyses and, as you can see in the charts at right, demand growth was in line with our expectations, with IATA reporting total demand growth of 5.9% y-o-y and WorldACD up 6.9% y-o-y.
As is the nature of annual comparisons, strong results in the previous year make for more difficult comparisons. In the case of 2017, this means that double-digit growth would inevitably subside. Looking back at 2016, air freight demand growth was negative at the beginning of the year, turning positive in April, with low single-digit year-over-year gains through August. But in September, growth began to accelerate, up 6.1% in that month, and then up 8.2%, 6.8%, and 9.8% in October, November, and December, respectively. As a result, FTK appeared to be quite robust last summer, and then dropped to a more modest rate of about 9% in September, and slightly less in October.
Although IATA maintains that “the current FTK growth cycle peaked earlier this year,” growth of nearly 6% in October is still great news, as tighter capacity has enabled carriers to boost rates. Yield growth from Europe, the Middle East and South Asia, combined with higher fuel costs, pushed yields up 20.5% y-o-y, according to WorldACD. Despite a minor fall-off in new export orders, and rising inventory levels that are more closely tracking sales, IATA expects the upward trend in volume growth to continue through 2018.
Regionally, the strongest y-o-y volume growth emerged in Africa, the Atlantic South and Midwest regions of the United States, and in Vietnam, Australia, Japan, and the United Kingdom – all of which posted double-digit growth rates. Pharmaceutical transport was up 19%, y-o-y, by volume, while volumes for high-tech and vulnerable goods rose by more than 11%. Carriers based in the Middle East posted y-o-y volume growth of 4.7%, the slowest growth of any region for the third consecutive month.
Another region of note was Asia. In October, IATA reported FTK growth of about 5% for Asia-based carriers, the slowest month this year. We note, however, that carriers based in this region added capacity at a rate of less than half the reported FTK growth rate. After fourteen months of consecutive demand growth, capacity on popular routes likely maxed out.
Over the next few weeks, airlines and airports will begin reporting November statistics, and we’ll have a better idea of what demand growth will look like during the final months of 2017.
Those interested in learning more about where the air cargo market is headed in 2018, are invited to join us next year at Cargo Facts Asia, co-hosted by the Shanghai Airport Authority. The Symposium will be held 23-25 April at the Mandarin Oriental Pudong. To checkout next year’s exciting agenda, or to register, visit www.cargofactsasia.com.