Cross-border trade revival boosts air freight recovery

A strong revival in cross-border trade growth emerging in the second half of last year hashelped air freight continue its recovery in the final months of 2014, with the latest figures from

Air freight demand expanded by a “healthy” 0.8% compared with the previous month, while aircargo capacity grew by 3.3% compared to the previous November, indicating a slight increase in theglobal air cargo load factors of IATA airlines.

November’s growth figure was broadly in line with the average in 2014, with global air freightgrowth for the first 11 months of the year averaging 4.4%. International traffic growth wasslightly higher, at 4.7%, while domestic growth was limited to 2.7%.

IATA noted that an important development emerged at the end of last year, “which, if itcontinues, bodes well for air freight markets”. With air freight closely linked to world trade – byvalue, about a third of goods traded internationally are shipped by air – it noted: “While domesticindustrial production remained stable, a strong growth trend in cross-border trade emerged over thesecond half of 2014, which has had a positive impact on air cargo volumes.”

In contrast, it said air cargo growth had broadly stagnated from 2011 to 2013 “as world tradevolumes basically grew in tandem with domestic production”.

Tony Tyler, IATA’s Director General and CEO, commented: “More goods are being tradedinternationally and that is fuelling the growth in air freight. This year we expect air freightmarkets to expand by 4.5%, outpacing projected growth in world trade (4.0%). But that optimism istempered by the many macro-economic and political risks that continue to impact trade flows.”

The most significant air freight volume growth in November was recorded by carriers in theAsia-Pacific and Middle East regions, at 5.9% and 12.9%, respectively, with carriers in theseregions capturing the vast majority (93%)of the global increase in FTKs. Carriers in Asia-Pacific,with a market share of 39.7%, accounted for 55% of the total year-on-year growth, while airlines inthe Middle East region, with a market share of 13.3%, contributed 38% of the global growth.

The 5.9% increase in FTKs carried by Asia-Pacific airlines was supported by a 4% capacityincrease, implying an improvement in average load factors. Although business confidence in Chinahas weakened, IATA noted that government policies to encourage consumption were having a positiveimpact.

“Japan, although weakened by a recent consumption tax increase, has seen business confidenceimprove,” IATA added. “Reflecting these trends, emerging Asian economies have seen a sharp rise inimports over the last six months.”

European airlines saw a small (0.9%) rise in FTKs while capacity expanded by 2.6%,indicated a drop in load factors. “The Eurozone economy continues to ‘flatline’, affected byrenewed concerns over the Euro and Russian sanctions,” IATA added. “Export markets in Asia andNorth America have potential but this is not outweighing the negative impact of weak homemarkets.”

North American carriers, meanwhile, recorded a FTK decline of 0.3% and a fall in capacityof 2.6%. This was despite congestion and labour issues affecting US west-coast ports that helped toshift some demand from sea to air, IATA noted, with the increased air freight traffic generated bythe port capacity crunch presumably carried by non-US or non-IATA airlines.

“Underlying indicators for the US economy remain sound, which should support a return togrowth,” IATA noted.

Middle Eastern carriers continued their strong performance, with their FTK growth of 12.9%driven by a 17.1% increase in capacity, as the region’s rapidly expanding airlines drew inintercontinental air freight shipments from around the world.

Latin American airlines saw FTKs fall by 0.7%, reflecting economic weaknesses across thecontinent, but particularly in Brazil and Argentina. Capacity was reduced 0.5%.

African airlines expanded FTKs by 10.5%, maintaining the positive trend of previous months.Load factors among African airlines also improved significantly as capacity was trimmed by2.9%.

Tyler said the air cargo industry was entering 2015 “propelled by solid growth trend”. However,he warned: “Shippers have a choice in modes of transport and, like customers everywhere, demandever greater value.

“To turn the growth into sustained stronger profitability, the air cargo industry faces thechallenge of investing in more efficient and higher quality processes and facilities that will giveit the winning edge over its competitors.”

He said that enhancing air freight’s competitiveness was at the top of the agenda for IATA’sWorld Cargo Symposium in Shanghai in March. The event is expected to draw 1,000 leading air freightexecutives to debate industry competitiveness and transformation under the theme of ‘Improving theCustomer Experience’.

IATA’s figures tally closely with those of air freight data specialist WorldACD, which recordedthat air freight tonnes flown in November were up 4.3%, year on year (YoY). It noted that althoughYoY growth had slowed compared to earlier months, the lower figure of 4.3% volume growth had beenagainst a tough comparison month in November 2013.

On the pricing side, worldwide average November average prices per kilogramme of air freightcarried (‘yields’) topped those for October, growing 1.7% in US dollar terms. But year on year,worldwide ‘yields’ went down by 4%.

WorldACD noted that this partly reflected a reduction in fuel surcharge levels in response tothe drop in fuel prices; excluding surcharges, average yields were still down, YoY, but the dropwas less than the 4% decline including surcharges.

As has been the case for much of the last two years, the transpacific market was the strongestof the large markets in November, with indications suggesting that the problems in the west-coastUS ports played a role. While air cargo revenues ex-USA dropped by 9% month-over-month (MoM) acrossthe Pacific, from Asia Pacific to North America, WorldACD recorded an impressive 17% growth inrevenues, month on month (MoM), thanks in part to a 9% yield increase.

After Asia Pacific, Africa and Latin America recorded the strongest demand growth with YoYvolume growth of more than 7%, with Latin America managing to keep yields almost level. Europesuffered, however, with revenues declining by more than 5%, both MoM and YoY, in US dollar terms,although YoY revenue and yield increased when measured in Euros, reflecting the decline of the Euroversus the US dollar.