The slowing global economy and weaker international trade flows hit worldwide air cargo traffic again in February, especially in Asia Pacific, resulting in the fourth consecutive month of lower volumes and biggest drop for three years, according to the latest monthly IATA figures.
Global air freight demand, measured in freight tonne kilometers (FTKs), decreased 4.7% year-on-year in February 2019, compared to the same period in 2018. This was the fourth consecutive month of negative year-on-year growth and the worst performance in the last three years, the International Air Transport Association said this week. Traffic dropped sharply in Asia Pacific and was weaker in Europe and North America.
Moreover, overall worldwide freight capacity, measured in available freight tonne kilometers (AFTKs), rose by 2.7% year-on-year in February 2019. This was the 12th month in a row that capacity growth outstripped demand growth.
Demand for air cargo continues to face significant headwinds, IATA explained, including:
* Trade tensions weighing on the industry;
* Weaker global economic activity and consumer confidence;
* Falling global export orders since September 2018, according to the Purchasing Managers Index (PMI)
Earlier this week, the World Trade Organization (WTO) warned of ‘strong headwinds’ during 2019 and 2020 as it downgraded short-term growth forecasts. International trade is now expected to increase only 2.6% this year, after growing 3% in 2018 and thus missing the predicted 3.9% growth forecast.
Similarly, IMF chief Christine Lagarde said this week that the organisation would probably downgrade its current 3.5% growth prediction for the world economy in 2019 and 2020, which was made only in January. “For this year, we expect 70% of the global economy to experience a slowdown in growth,” she said.
With air cargo often seen as an early indicator of wider economic trends, the 4.7% drop in February marks an acceleration of the recent downward trend. Airlines already saw a weak start to 2019 with a 1.8% drop in cargo traffic in January, following on from a 0.5% fall in December 2018 and stagnating volumes in November.
Commenting on the latest figures, Alexandre de Juniac, IATA’s Director General and CEO, said: “Cargo is in the doldrums with smaller volumes being shipped over the last four months than a year ago. And with order books weakening, consumer confidence deteriorating and trade tensions hanging over the industry, it is difficult to see an early turnaround.
“The industry is adapting to new markets for e-commerce and special cargo shipments. But the bigger challenge is (that) trade is slowing. Governments need to realize the damage being done by protectionist measures. Nobody wins a trade war. We all do better when borders are open to people and to trade,” he declared.
Last month IATA downgraded its global air freight growth forecast for 2019 to 2% having late last year predicted an increase of 3.7%, citing a slowdown in international trade and an uncertain outlook, as well as an unfavourable political climate which has fostered protectionism and anti-globalisation sentiment.
At a regional level, airlines in all regions reported a contraction in year-on-year demand growth in February 2019 except for Latin America, the IATA figures showed.
Asia-Pacific airlines saw demand for air freight contract by 11.6% in February 2019, compared to the same period in 2018. Weaker manufacturing conditions for exporters in the region, ongoing trade tensions and a slowing of the Chinese economy impacted the market. Capacity decreased by 3.7%.
North American airlines saw demand contract by 0.7% in February 2019, compared to the same period a year earlier. This was the first month of negative year-on-year growth recorded since mid-2016, reflecting the sharp fall in trade with China. North American carriers have benefited from the strength of the US economy and consumer spending over the past year, IATA noted. Capacity increased by 7.1%.
European airlines experienced a contraction in freight demand of 1.0% in February 2019 compared to a year ago. The decline is consistent with weaker manufacturing conditions for exporters in Germany, one of Europe’s major economies. Trade tensions and uncertainty over Brexit also contributed to a weakening in demand, according to the association. Capacity increased by 4.0% year-on-year.
Middle Eastern airlines’ freight volumes contracted 1.6% in February 2019 compared to the year-ago period. Capacity increased by 3.1%. A clear downward trend in seasonally-adjusted international air cargo demand is now evident with weakening trade to/from North America contributing to the decrease, IATA said.
Latin American airlines bucked the downward trend with an 2.8% rise in traffic last month. Despite the economic uncertainty in the region, a number of key markets are performing strongly. Seasonally-adjusted international freight demand achieved growth for the first time in six months. Capacity increased by 14.1%.
African carriers saw freight demand decrease by 8.5% in February 2019, compared to the same month in 2018. Seasonally-adjusted international freight volumes are lower than their peak in mid-2017; despite this, they are still 25% higher than their most recent trough in late-2015. Capacity grew 6.8% year-on-year.
