Wednesday, January 8, 2020

Air Cargo Demand Continues to Shrink Whilst Capacity Increases as IATA Figures Released

UK Freight Forwarder However Contradicts Saying Space is Ever Harder to Find
Shipping News Feature

WORLDWIDE – The International Air Transport Association (IATA) has released data for global air freight markets showing that demand, measured in freight tonne kilometres (FTKs), decreased by 1.1% in November 2019, compared to the same period in 2018. This marks the thirteenth consecutive month of year-on-year declines in freight volumes.

Despite the decline in demand, IATA says that November’s performance was the best in eight months, with the slowest year-on-year rate of contraction recorded since March 2019. In part, November’s outcome reflects the growing importance of large e-commerce events such as Singles Day and Black Friday.

While international e-commerce continues to grow, overall air cargo demand continued to face headwinds from the effects of the trade war between the US and China, the deterioration in world trade, and a broad-based slowing in global economic growth. Alexandre de Juniac, IATA’s Director General and CEO, said:

“Air cargo recovered slightly in November, with demand down 1.1%, a significant improvement over the 3.5% decrease in October. However, the fourth quarter is a peak season for air cargo. So, a decline in growth is still a disappointment. Looking forward, signs of a thawing in US-China trade tensions are good news but there is still a long way to go if cargo is to achieve 2.0% growth forecast in 2020.”

Freight capacity, measured in available freight tonne kilometres (AFTKs), rose by 2.9% year-on-year in November 2019. Capacity growth has now outstripped demand growth for the 19th consecutive month.

Looking regionally, airlines in Asia-Pacific, Latin America and the Middle East suffered sharp declines in year-on-year growth in total air freight volumes in November 2019, while North American carriers experienced a more moderate decline. Europe and Africa were the only regions to record growth in air freight demand compared to November last year.

Asia-Pacific airlines saw demand for air freight contract by 3.7% in November 2019, compared to the same period in 2018. This was the sharpest drop in freight demand of any region for the month. Capacity increased by 1.8%. The US-China trade war has significantly affected the region, with demand on the large Asia - North America market down 6.5% year-on-year in October (latest available data). However, the thawing of US-China trade relations and robust economic growth in key regional economies are positive developments.

North American airlines saw demand decrease by 1.1% in November 2019, compared to the same period a year earlier. Capacity increased by 3.3%. Slower growth in the US economy and trade tensions with China have affected demand. However, positive progress in trade negotiations between both countries highlighted by the ‘phase one’ deal is a positive development.

European airlines posted a 2.6% increase in freight demand in November 2019 compared to the same period a year earlier. Better than expected economic activity in Q3 in some of the region’s large economies helped support demand. Capacity increased by 4% year-on-year.

Middle Eastern airlines’ freight volumes decreased 3% in November 2019 compared to the year-ago period, a significant improvement over the 5.7% decrease in October. Capacity increased by 2.6%. Against a backdrop of operational and geopolitical challenges facing some of the region’s key airlines, seasonally adjusted freight volumes in the region have continued a modest upwards trend which is a positive development for the region’s carriers. However, escalated geopolitical tensions threaten the regions’ carriers in the period ahead.

Latin American airlines experienced a decrease in freight demand in November 2019 of 3.4% compared to the same period last year. Various social and economic headwinds in the region’s key economies have impacted the region’s air cargo performance. Capacity decreased by 2.3% year-on-year.

African carriers posted the fastest growth of any region in November 2019, with an increase in demand of 19.8% compared to the same period a year earlier. Strong trade and investment links with Asia contributed to the positive performance. Capacity grew 13.7% year-on-year.

Despite the IATA statistics not everybody sees the situation from an individual company point of view quite the same way. In the UK Chadd Blunt, CEO of Millennium Cargo, suggests that, despite the published global decline in air freight, he has still experienced difficulty in locating air space capacity for his customers.

Citing a change in customers’ buying habits, Blunt, who has over 30 years’ experience within the freight forwarding sector, suggests that whilst it’s experiencing a period of decline, air freight still remains an integral component of the industry as numerous market sectors remain reliant on its shorter lead times. He comments:

“Everybody is battling for space so every freight forwarder is experiencing similar issues in finding air freight capacity. Services have been reduced and aircraft have been changed, along with their routes which in turn increases the difficulty of placing freight quickly. We live in an accelerated society where customer demands are reshaping the fabric of our industry.

"With the rise of e-commerce businesses, vendors are working hard to offer the best customer experience possible which subsequently means offering improved delivery times so whilst the IATA is suggesting that there is an overall decline in air freight, there are still numerous market sectors that consider air freight as an essential component to any international logistics network.

“Therefore, although certain geo-political and economic issues have caused a blip in air freight growth, its demand remains significant from particular sectors, however unfortunately the reduction in services have also resulted in a pecking order for volume that is affecting forwarders throughout the globe, further cementing reasoning behind the reduction in movement.”