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IATA sees challenging road ahead for air cargo

By Hpanchal on October 1, 2013

There was a continued modest improvement in air cargo markets in August, according to the International Air Transport Association.

August airfreight demand was up 3.6 percent year over year, which is considerably better than the year-to-date performance of a 0.7-percent expansion. Demand for airfreight began increasing slowly in April, in line with strengthening business confidence, as economic performance in Europe and the U.S. showed signs of improvement. Story continued after graph.

But a strong upswing would require a significant improvement in the cargo performance of Asia-Pacific airlines, which are the largest players in global air cargo with a collective 38-percent market share. Their year-on-year performance for August was flat. “There are some signs of improvement in demand, but the airfreight business remains very tough,” Tony Tyler, IATA’s director general and CEO, said. “Freight volumes are only now reaching the levels of 2011 when the cargo business peaked with revenues of US$67 billion. This year, we expect US$59 billion of revenues from air cargo globally. That takes the top line back to 2007 levels. But to earn that revenue, we will be moving nearly 17 percent more cargo and dealing with a 40-percent hike in jet fuel. The road ahead will be challenging.” The bulk of the August growth came from carriers in Europe and the Middle East, while Asia-Pacific volumes were stagnant and African volumes fell significantly. Asia-Pacific airlines’ freight demand was flat compared to the previous August. That is an improvement on the year-to-date performance, which showed a 1.9-percent decline. The performance of the region’s carriers can be largely attributed to a slowdown in emerging markets and a deceleration of China’s growth over the first half of the year. A rebound in trade growth from July could be an encouraging sign. But the region’s carriers will be facing stiffer competition for long-haul cargo. Airlines based in the Middle East, for example, have expanded their cargo business significantly. 
 European carriers’ freight grew slightly in August. The European economy has started growing again, and imports have increased. North American airlines showed signs of a small pick-up. There has been considerable volatility in North American freight performance in 2013. Year-to-date, North American carriers have seen cargo demand slip by 1.2 percent. 
 Middle Eastern carriers continued the strong growth that has been characteristic for the region all year. In August, freight volumes were up nearly 24 percent year over year, though this was exaggerated by the effect of Ramadan, which fell a month earlier this year. Middle Eastern freight growth has accelerated in recent months. The Middle East’s strategic location and efficient hub connections are making it a growing competitor for airfreight between Asia’s manufacturing centers and European consumers. Latin American airlines grew their freight volumes strongly. Robust trade volumes in Latin America are providing a solid foundation for expansion in airfreight demand. African carriers experienced another decline in freight volumes. After a positive start to 2013, African airfreight growth has slowed and is now up by just 0.7 percent for the year to date. Despite healthy trade volumes and strong growth in many African countries, African airlines face intense competition on key trade routes.