Recovery for air freight continues into February despite rise in inventories

Air freight’s global recovery continued into February with a 2.9% increase in flown tonnekilometres (FTKs), although a slight rise in inventory-to-sales ratios contributed to the growth

The first two months of 2014 have seen an overall 3.6% improvement in demand over the previousyear, continuing a growth trend in global air cargo markets that began in the second half of 2013.However, the vast majority of the growth in cargo was achieved by airlines in the Middle East andEurope, which recorded 11.9% and 5.5% growth, respectively, compared to the previous February,while volumes carried by North American and Asia-Pacific carriers, were basically flat.

IATA said the fundamental drivers of air freight remained broadly positive, suggesting that thelower overall growth in February was “likely due to temporary factors leading to volatility involumes”. According to IATA’s freight model, world trade growth contributed 2 percentage points toFebruary’s year-on-year 2.9% increase in demand, while a slight rise in inventory-to-sales ratioshad a dampening effect equivalent to around 1.2 percentage points.

IATA said the rise in inventories was “likely reflecting improvements in business conditions,which point to stronger output and sales ahead”. Nevertheless, the airline association warned ofseveral potential risks, including companies continuing to “on-shore” their manufacturing supplychains, encouraged by an increasing number of protectionist measures introduced by many of theworld’s top 20 economies.

While the outlook for air freight remains “broadly positive, consistent with the cyclicalpick-up in global economic growth”, IATA said the current growth in world trade was slower thanexpected at this point in the economic cycle, largely due to on-shoring.

Tony Tyler, IATA’s Director General and CEO, commented: “The 3.6% growth in demand recorded overthe first two months of this year is a significant step up from the 1.4% growth in demand over thewhole of 2013. There are, however, some serious trends that are not in the industry’s favour.Companies continue to ‘on-shore’ their manufacturing supply chains, and the world’s top 20economies implemented some 23% more protectionist measures last year than in 2009. These factorsare a major part of the reason why we are not seeing trade growth of 5-6%, which we would expect tosee at the current level of domestic production.”

While the US and Europe were gaining economic momentum, certain indicators of China’s economicperformance “suggest that there is potential for a slowdown in early 2014 – specifically inmanufacturing and forward-looking export orders”, he added. 

IATA concluded: “These factors will likely keep future growth in air freight demand contained,but still stronger than the performance in 2013.”

In response to fears that it will fail to meet its 7.5% annual GDP growth target, China’sgovernment has announced a series of measures intended to boost economic growth, following a stringof disappointing data. The measures include tax cuts for small firms and the acceleration of majorinfrastructure projects including the construction of railway lines.