Signs of life? Maybe “signs of hope” is more like it.

The International Air Transport Association published its analysis of June air freight traffic. IATA titled its press release “ Air Freight Volumes Show Signs of Life,” but our take is that those signs are pretty feeble, and that we really need to see two or three consecutive months of growth stronger than June’s 1.2% before we make any assumptions about a return to health. In fact, despite the small year-over-year increase in demand in June (and the even smaller 0.9% increase in May), international air freight traffic for the first half of 2013 still lags 1H12, and it is only due to increases in domestic traffic in Asia, Latin America and North America that total traffic has finally caught up to last year.

However, despite the relatively low growth, it is still growth rather than decline, and does offer some hope that the predictions we and others made at the beginning of the year will turn out to be correct. Those predictions – that a return to steady growth in demand for airfreight would begin in 2013, but not until the second half, and then only slowly – were based on the belief that the world economy would continue to stagnate through much of 2013, picking up steam only toward the end of the year.

The fear at the beginning of the year that Europe would implode has not been realized. Europe still appears to be in recession, but dissolution of the EU and/or abandonment of the euro no longer seem like realistic worries. The new fear, that China’s economy will collapse, also seems unreasonable. Yes, China’s economic growth rate has slowed. And yes, it may slow still further. But anyone who expected China to maintain a double-digit annual rate of economic growth for much longer was being unrealistic. That doesn’t mean there won’t be problems in China, or that the rest of the world can relax and let China lead the way to prosperity, but rather that we do not need double-digit growth in the Chinese economy in order to have growth in demand for air freight.

To me, the key is still Europe. If the countries of the European Union can sort out their political and economic problems, then we should see a gradual increase in demand for air freight worldwide. Not at the 6% annual rate some people believe is the historic normal, and maybe not at the 5% rate that some believe should be the new normal. But somewhere between 3% and 4% seems to be a reasonable expectation – at least to this non-economist.

The chart below shows IATA’s breakdown of airfreight demand and capacity by carrier home region. As has been the case for some time, carriers from the Asia Pacific region and North America are losing market share to those based in the Middle East. Interestingly, European carriers reported their freight traffic up 2.6% y-o-y in June, despite the fact that the region still remains in recession. We suspect that if only carriers from the EU itself were counted, the growth would be negative, but since IATA includes Turkey and Russia in “Europe” the results are boosted by carriers like Turkish and Transaero, while the continued dismal performance at Air France-KLM carries less weight – but Air France is a subject for Thursday’s blog, so here’s the chart…