Air freight demand grew 6.8% in February; protectionism a threat

Consistent with the current robust global trade, air cargo demand is still growing although the International Air Transport Association (IATA) warned about "the best of the upturn for air freight has passed."

"Demand for air cargo continues to be strong, with 6.8% growth in February," Alexandre de Juniac, IATA's Director General and CEO, confirmed.

"However, the positive outlook for the rest of 2018 faces potentially strong headwinds, including escalation of protectionist measures into a full-blown trade war. Prosperity grows when borders are open to people and to trade, and we are all held back when they are not."

February, 2018 showed a 6.8% increase in demand measured in freight tonne kilometers (FTKs) versus the same period last year. Adjusting for the potential Lunar New Year distortions by combining growth in January, 2018 and February, 2018, demand increased by 7.7% – the strongest start to a year since 2015.

Freight capacity, measured in available freight tonne kilometers (AFTKs), grew by 5.6% year-on-year in February 2018. Demand growth outstripped capacity growth for the 19th month in a row, which is positive for airline yields and the industry's financial performance.

Nevertheless, the demand drivers for air cargo are moving away from the highly supportive levels seen last year. In recent months the Purchasing Managers’ Index (PMI) for manufacturing and export orders has softened in a number of key exporting nations including Germany, China and the US. And the seasonally-adjusted demand for air cargo which rose at a double-digit annualized rate for much of 2017 is now trending at 3%.

Overall, Asia-Pacific airlines saw demand in freight volumes grow 6.5% in February, 2018 and capacity increase by 7.2%, compared to the same period in 2017. The upward-trend in seasonallyadjusted volumes has returned, with volumes currently trending upwards at an annualized pace of between 6.0% and 7.0%. As the largest freight-flying region, carrying close to 37% of global air freight, the risks from protectionist measures impacting the region are disproportionately high.

Middle Eastern carriers’ year-onyear freight volumes increased 7.4% in February 2018 and capacity increased 7.6%. Seasonally adjusted freight volumes continue to trend upwards, however, they have slowed to an annualized rate of 4% since late 2017. This largely reflects the weak conditions on the routes to and from Europe which have seen demand trend downwards at a doubledigit rate over the past five months.

North American airlines’ freight volumes expanded 7.3% in February 2018 compared to the same period a year earlier, and capacity increased by 4.1%. Seasonally-adjusted volumes are broadly trending sideways. The weakening of the US dollar over the past year has helped boost demand for air exports. Data from the US Census Bureau shows a 10.2% year-on-year increase in air export volumes from the US in January 2018, compared to a slower rise in imports of 6.7%.

Latin American airlines experienced growth in demand of 8.7% in February 2018 and a capacity increase of 6.9%. The pick-up in demand over the last 18 months comes alongside signs of economic recovery in the region’s largest economy, Brazil. Seasonallyadjusted international freight volumes are now back to the levels seen at the end of 2014.