IATA – Weak December weighs on full-year air cargo activity

Cargo traffic didn’t fly as high in ‘18 (Photo: Flickr/Tomas Del Coro)

Global airfreight traffic rose 3.5 percent in 2018, weighed down by an unusually weak December in which volumes fell 0.5 percent from the year-earlier period, according to International Air Transport Association (IATA) data released today.

Volumes for the year fell significantly from the 9.7 percent year-over-year gain reported in 2017, a period of synchronized global recovery and significant inventory restocking unlikely to be repeated. Volumes in 2018 started strong but weakened toward the end of the year as global economies slowed, concerns escalated over Britain’s departure from the European Union, the U.S. government experienced a partial slowdown and trade tensions flared between the U.S. and China.

The December data was the worst monthly performance since March 2016, according to IATA.Carriers serving the Asia-Pacific market, the world’s largest in terms of market share, reported a 4.5 percent decline in December, which is typically a strong month for Asian air exports. The weak December results – which were actually tame compared to figures from other sources – lend empirical credence to anecdotes of an uneventful holiday period for air cargo activity. In prior years, companies like Apple Inc. (NASDAQ:AAPL) would book hundreds of charter flights out of Asia, pressuring capacity and leading to rate spikes. That was not the case this past December, which was a turbulent month across the world, especially in financial markets. U.S. stock prices, for example, had their worst December performance since the Great Depression.

Lower consumer sentiment, especially among Americans, didn’t help matters; consumer expectations in the U.S. came in surprisingly weak, with many consumers surveyed expecting a recession in 2019.

Europe and North America fared better in December. North America, posting a 2.9 percent year-over-year gain, had the best results of the six regions surveyed. Of the regions, only North America and Europe posted year-on-year gains of more than 0.1 percent. Three markets – Asia, Africa and Latin America – posted declines.

Freight capacity, measured in available freight ton kilometers, rose by 5.4 percent in 2018, significantly exceeding demand. Capacity outstripped demand for the last 10 months of 2018, according to IATA data. However, yields, measured by revenue per-pound, proved resiliently firm, IATA said.

IATA forecast that 2019 demand will grow by about 3.7 percent. However, the airline trade group said the risks to its projection skew significantly to the downside due to continued geo-political tensions and the general trend towards protectionist policies. “Keeping borders open to people and to trade is critical,” said Alexandre de Juniac, IATA’s director-general and CEO.

Except for the U.S., all major exporting nations reported shrinking order books during the second half of the year. New export orders from U.S. firms grew in January, but the rate of growth contracted for the first time in nearly three years, according to data from the Institute for Supply Management, which tracks monthly U.S. supply and purchasing activity.

Jesse Cohen, FreightWaves’ air cargo market expert, said a resolution of the U.S.-China trade dispute, among other tensions, is critical for air freight growth to hit IATA’s 2019 targets, especially given the downward trend in the pace of export activity.

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Mark Solomon

Formerly the Executive Editor at DC Velocity, Mark Solomon joined FreightWaves as Managing Editor of Freight Markets. Solomon began his journalistic career in 1982 at Traffic World magazine, ran his own public relations firm (Media Based Solutions) from 1994 to 2008, and has been at DC Velocity since then. Over the course of his career, Solomon has covered nearly the whole gamut of the transportation and logistics industry, including trucking, railroads, maritime, 3PLs, and regulatory issues. Solomon witnessed and narrated the rise of Amazon and XPO Logistics and the shift of the U.S. Postal Service from a mail-focused service to parcel, as well as the exponential, e-commerce-driven growth of warehouse square footage and omnichannel fulfillment.

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