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Geopolitics contribute to 11% decline in air cargo demand

IATA says disruptions also pinching freight capacity

A pallet of air cargo being maneuvered for loading on a jetliner at Dallas Fort Worth International Airport. (Photo: Jim Allen/FreightWaves)

The downturn in global air cargo demand intensified during April and is outpacing the slowdown in overall international trade in goods, as the Ukraine war, strict lockdown measures in China and inflation dragged down economic activity, an aviation industry group representing most major airlines reported this week.

Meanwhile, international travel demand in the passenger segment shot up in April, especially in the trans-Atlantic market, in response to reductions in COVID border restrictions ahead of the busy summer season.

Year-over-year shipment volumes contracted 11.2% in April and were down 1% versus 2019, which was a weak year for the cargo sector, according to the International Air Transport Association. The drop follows a 5.2% fall in March when seasonally adjusted volumes reached a 16-month low. And seasonally adjusted cargo throughput in April was 2.7% below the March level.

New export orders are contracting in all G7 markets except the U.S., according to the Producer Price Index. The consumer switch from spending on goods to services after a two-year hiatus or pull back because of high prices, along with China’s zero-COVID policy that has choked factory production and supply chain disruptions caused by the Ukraine war, have contributed to the continuing decline of goods trade in 2022. 

The World Trade Organization in April revised downward its projection for merchandise trade growth to 3% from 4.7% earlier this year and 3.4% in 2023.

The softer market is putting pressure on aircraft load factors and cargo yields.

New export orders are a leading indicator of air cargo demand and world trade, indicating that May will also experience a significant drop in cargo volume when IATA next reports. But Clive Data Services, which has more current and arguably more accurate market data, has already said demand in May fell 7%.

Although air cargo demand is on a downward trajectory, there is considerable uncertainty about whether the trend will necessarily continue the rest of the year. Many economic watchers expect a rebound in air transport as China resumes pumping out manufactured goods that were difficult to export during the lockdowns. Work stoppages or slowdowns are also possible this summer if longshoremen at ports on the U.S. West Coast can’t soon agree on a new labor contract, which could cause shippers to divert cargo to airlines to avoid delays. Some of the slow throughput is related to labor shortages at major European and U.S. airports, which could soon improve. And while many retailers now report excess inventories for hard goods like furniture, there are other categories such as perishable food and apparel where demand remains high.

Airfreight professionals are also sanguine about the decline in business because they are coming off record highs, including 7% growth last year over 2019 levels.

IATA Chief Economist Marie Owens Thomsen last month estimated a 20% chance for a recession next year, but said economic activity and air cargo would still be relatively solid in 2022.

Capacity tightens

IATA said aircraft capacity for cargo also slipped 2% below 2021 in April and decreased slightly on a sequential monthly basis, with Asia experiencing the largest fall in space availability. 

Room on aircraft for cargo has never fully recovered since the pandemic because many passenger aircraft are still grounded. Russia’s invasion of Ukraine and China’s zero-COVID policy, which triggered flight cancellations because sequestered ground workers couldn’t get to the airport, worsened the situation. Western sanctions essentially removed several Russian all-cargo carriers from the market and limited the ability of Ukrainian heavy-lift carriers to function. Russia’s subsequent closure of its airspace to overflights forced airlines to detour between Asia and Europe, reducing capacity utilization. An influx of new widebody passenger services to meet demand from vacationers has led to increased capacity in the trans-Atlantic region, partially minimizing the global crunch. 

International available cargo-ton-kilometers, a measure of capacity, actually increased 1.2%, showing that the declines were primarily domestic markets impacted by the omicron outbreak and effects of the Ukraine war.

All-cargo airlines continue to add aircraft to their fleets, despite the weaker shipping environment. Reasons for their growth posture include long-term optimism for solid growth in airfreight over the next 10 to 20 years, continued shortages in passenger belly capacity and air transport being used as a relief valve for ongoing supply chain disruptions.

April air cargo volumes fell 15.8% versus 2021 in the Asia-Pacific region, the worst decline in any region and more than triple that of March, according to IATA’s monthly update. Airlines in the region were heavily impacted by the lower manufacturing activity in China because of COVID lockdowns. 

North American carriers recorded a 6.6% decrease in cargo volumes in April as Asia-North America demand declined significantly while Europe-North America demand remained strong. Capacity increased 5.2% compared to April 2021, largely due to the buildup of passenger routes in the trans-Atlantic trade, which has contributed to lower load factors and rates.

Latin America was the one bright spot, with an increase of 40.9% in cargo volumes. One reason for the increased uplift is more capacity to carry goods as airlines finally have more liquidity to add freighters in anticipation of continued cargo growth and reintroduce passenger services. 

IATA said international passenger demand dipped a point from March due to travel restrictions in China, but is up 78% year-over-year and has recovered to three-quarters of the 2019 level. International demand, however, soared 331% from last year and is now at 57% of 2019 volumes. That is good news for shippers that will be able to utilize space in those planes to transport goods.

Click here for more FreightWaves/American Shipper stories by Eric Kulisch.


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Eric Kulisch

Eric is the Supply Chain and Air Cargo Editor at FreightWaves. An award-winning business journalist with extensive experience covering the logistics sector, Eric spent nearly two years as the Washington, D.C., correspondent for Automotive News, where he focused on regulatory and policy issues surrounding autonomous vehicles, mobility, fuel economy and safety. He has won two regional Gold Medals from the American Society of Business Publication Editors for government coverage and news analysis, and was voted best for feature writing and commentary in the Trade/Newsletter category by the D.C. Chapter of the Society of Professional Journalists. As associate editor at American Shipper Magazine for more than a decade, he wrote about trade, freight transportation and supply chains. Eric is based in Portland, Oregon. He can be reached for comments and tips at [email protected]