By Emmie A. Abadilla
Global air freight demand, measured in freight tonne kilometers (FTKs), grew 3.5% at the end of 2018 though it was significantly lower than the extraordinary 9.7% growth recorded in 2017, according to the latest data of the International Air Transport Association (IATA).
Softening demand in December affected the 2018 overall results. Year-on-year, December demand decreased 0.5%, the worst performance since March 2016.
Freight capacity, however, grew by 3.8%. This was the tenth month in a row that year-on-year capacity growth outstripped demand growth.
Freight capacity, measured in available freight tonne kilometers (AFTKs), rose by 5.4% in 2018, outpacing annual growth in demand.
This exerted downward pressure on the load factor but yields proved resilient.
International e-commerce grew in 2018 which was a positive factor for the year. Yet, there was a softening of several key demand drivers.
The restocking cycle, during which businesses rapidly built up inventories to meet demand, ended in early 2018.
The export order books of all major exporting nations, with the exception of the US, contracted in the second half of 2018.
Also, consumer confidence weakened compared to very high levels at the beginning of 2018.
“Air cargo demand lost momentum towards the end of 2018 in the face of weakening global trade, sagging consumer confidence and geopolitical headwinds,” explained Alexandre de Juniac, IATA’s Director General and CEO.
“Still, demand grew by 3.5% compared to 2017,” he added.
Hence, “We are cautiously optimistic that demand will grow in the region of 3.7% in 2019. But with the persistence of trade tensions and protectionist actions by some governments there is significant downside risk. Keeping borders open to people and to trade is critical.”
“To attract demand in new market segments, the air cargo industry must improve its value proposition.”
“Enabling modern processes with digitalization will help build a stronger foothold in e-commerce and the transport of time- and temperature-sensitive goods such as pharmaceuticals and perishables,” he pointed out.
Airlines in all regions with the exception of Africa reported an annual increase in demand in 2018.
Asia-Pacific carriers posted the weakest growth of any region in December 2018 with a decrease in demand of 4.5% compared to the same period a year earlier.
Capacity increased by 2.6%. The weaker performance in December contributed to growth in freight demand of only 1.7% in 2018 compared to 2017.
Annual capacity increased 5.0%. The weaker performance of Asia-Pacific carriers in 2018 largely reflects a slowing in demand for exports from the region’s major exporters (China, Japan and Korea).
Signs of a moderation in economic activity in China and an escalation of trade tensions continue to pose a downside risk to air cargo in Asia-Pacific.
Middle Eastern carriers’ freight volumes increased 0.1% year-on-year in December and capacity increased 4.5%.
This contributed to an annual increase in demand of 3.9% in 2018 – the third fastest growth rate of all the regions.
Annual capacity increased 6.2%. The region continues to be affected by geopolitical issues.
North American airlines posted the fastest growth of any region for the seventh consecutive month in December 2018 with an increase in demand of 2.9% compared to the same period a year earlier. Capacity increased by 4.5%.
This contributed to an annual growth in demand in 2018 of 6.8%, matching the rate of capacity increase.