A study conducted by an organization representing around 260 airlines – comprising 83 percent of global air traffic – found that global air freight growth continued slowing down through May 2015.
Compared to May 2014, growth in freight ton kilometers (FTK) was 2.1 percent, according to International Air Transport Association (IATA) data. This represents the slowest rate this year, and a month in which freight growth was outpaced by capacity, which expanded 4.3 percent. The freight growth rate in April was 3.9 percent. The IATA’s monthly report explained that this is a sign that the industry is seeing some slowdown, likely due to weakness in some markets and recent trade developments. Following a robust performance late last year, global trade volumes have fallen throughout early 2015.
The report stated that a major force behind the flattening of global trade has been recent issues in the Asia Pacific region. Carriers there recorded a 2.8 percent rise in FTKs in May year-over-year. Worldwide, freight volumes were up 4 percent year-over-year. The region has seen slowdowns in both imports and exports recently, a trend that could push air cargo rates further downward. However, it wasn’t just the Asia Pacific region that saw slowed growth. In most places around the world the story was the same.
“The air freight industry is seeing some slowdown.”
Most regions worldwide see air cargo business shrink
European, Latin American and North American airlines all reported declines in demand. Of the three, Latin America took the worst hit with a 10.5 percent drop in demand. Though the region has seen healthy trade activity in general, air freight in Latin America bucked that trend through May, possible due to weakness in Argentina and Brazil. Demand in Europe fell 1.3 percent compared to a year ago, while in North America it dropped 2.9 percent.
The shrinking business in Europe can partially be blamed on nerves regarding the potential Greek exit from the eurozone. In North America, slow disappointment first quarter economic growth in the U.S., due to West Coast port condition and harsh weather, likely pulled demand down.
“Cargo growth has undoubtedly come off the boil,” Tony Tyler, IATA’s director general and CEO, explained in a press release. “The expansion in volumes we saw in 2014 has ground to a halt, and load factors are falling. Some economic fundamentals still point to a rebound in the second half of the year, but we have to recognize that business confidence is flat and export orders in decline. There is also the risk of a shock to the economic system of a ‘Grexit’ from the Eurozone.”
Air cargo demand rose substantially in the Middle East through May 2015, compared with last year.Middle East and Africa each see air cargo demand grow
Two regions managed to help fuel what little global air freight growth there was, though. The Middle East and Africa each saw air cargo demand increase through May 2015 compared with last year. Africa experienced a 3 percent rise in demand and a 1.3 percent capacity increase. Though somewhat unstable, Africa is the third-fastest growing region to date this year. The wider economies in the area have managed to overcome weak performance in Nigeria and South Africa.
“Airlines in the Middle East vastly outperformed the other regions.”
Airlines in the Middle East, meanwhile, vastly outperformed the other regions of the world in terms of air cargo demand. Business there grew 18.1 percent in May 2015. Trade in the region has improved, and airlines have been benefiting from the Gulf carriers’ hub strategy. Capacity in the Middle East grew 19.4 percent in May.
In the conclusion to the IATA press release on May’s sluggish growth, Tyler indicated world leaders would be meeting soon in Geneva to implement the World Trade Facilitation agreement.
“If implemented, this could boost world GDP by up to $1 trillion. I urge governments worldwide to bring down the barriers to facilitate trade that will accelerate prosperity and innovation,” he explained.
Air freight represents 35 percent of goods traded worldwide, the press release noted, in stating that sluggish air cargo growth represents a world trade slowdown.