Global air freight market shows strongest performance yet

First half of 2017

Buoyed by improved trade and new export orders soaring at a six-year high, global air freight demand, measured in freight tonne kilometers (FTKs), grew by 10.4% in the first-half of 2017 versus the same period last year.

This was the strongest first halfyear performance since air cargo’s rebound from the 2010 financial crisis and nearly triple the industry’s average growth rate of 3.9% over the last five years, according to the most recent report of the International Air Transport Association (IATA).

On the other hand, freight capacity, measured in available freight tonne kilometers (AFTKs), grew by 3.6% in the same period. Demand growth continued to significantly outstrip capacity growth, which is positive for yields.

Overall, June’s results confirmed the air cargo sector’s strong performance in the first semester. Year-onyear demand growth in June increased 11% compared to the same year-earlier period and freight capacity grew by 5.2% year-on-year.

While the cyclical growth period may have peaked and the period when companies look to restock inventories quickly, which often gives air cargo a boost, may be nearing an end, the outlook for air freight is optimistic with demand expected to grow at a robust rate of 8% during the third quarter of this year.

“Air cargo is flying high on the back of a stronger global economy,” says Alexandre de Juniac, IATA’s Director General and CEO. “Demand is growing at a faster pace than at any time since the Global Financial Crisis. That’s great news after many years of stagnation. Even more importantly, the industry is taking advantage of this momentum to accelerate much-needed process modernization and improve the value it provides to its many customers.”

Notably, all regions experienced positive freight growth in the first half of 2017 with carriers in Asia Pacific and Europe accounting for two-thirds of the increase in demand.

Asia-Pacific airlines’ freight volumes grew 10.1% in June 2017 compared to the same period in 2016 and capacity grew by 7.8%. This contributed to a growth in freight demand of 10.1% in the first half of 2017 compared to the first half of 2016.

Seasonally adjusted international freight volumes are now 4% above the level reached in 2010 following the global financial crisis bounce-back. Demand growth has been strongest, between 1315%, on international routes within Asia as well as between Asia and Europe. Capacity in the region increased 4.8% in the first half of 2017.

Middle Eastern carriers’ freight volumes increased 3.7% year-on-year in June 2017 and capacity increased 2.2%. This contributed to an increase in demand in the first half of 2017 of 7.6%, well below the 10.8% average annual rate seen over the past five years.

The slowdown in growth is mainly due to strong competition from carriers in other regions particularly on the Asia-Europe route rather than a significant decrease in demand which has continued to trend upwards at a solid rate of around 10% in annualized terms since early 2017.

For the first time in 17 years the region’s share of total international freight flown in the first half of 2017 has fallen. Capacity in the region increased by 1.5% in the first half of 2017.

North American carriers saw freight demand increase by 12.7% in June 2017 year-on-year and capacity increase by 3%. This contributed to strong growth in demand in the first half of 2017 of 9.3% in contrast to the negative growth seen during the same period in 2016. Capacity grew by 1.5% in the first half of 2017.

Seasonally adjusted international volumes remain very strong, surging by an annualized rate of more than 30% in the second quarter. The strength of the US dollar continues to boost the inbound freight market but is keeping the export market under pressure.