Air Cargo Newsdesk

Air cargo facing the spectre of trade wars

Air cargo facing the spectre of trade wars

GLOBAL air cargo’s vulnerability is increasing in tandem with the growing spectre of trade wars, the International Air Transport Association (IATA) warns.

Although the association’s latest data shows that demand, measured in freight tonne kilometres (FTKs), rose by 2.3 per cent in August this year, in comparison with the same period in 2017, three key factors are threatening the air cargo industry’s buoyancy, writes Thelma Etim.

Firstly, manufacturing firms’ export orders have weakened, specifically in Europe, China, Japan and Korea, where orders have declined in recent months.

Sources: IATA Economics, IATA Monthly Statistics

Secondly, longer supplier delivery times are being reported by manufacturers in Asia and Europe – the top two global trading areas by volume. This trend suggests they have less need for the speed of airfreight.

Thirdly, are the risks to global trade from the recent escalation in trade tensions. The World Trade Organisation (WTO) announced at the tail end of September that it anticipates trade growth will slow for the rest of this year to 3.9 per cent and slow further to 3.7 per cent in 2019.

“There are no winners in trade wars…”

The new forecast for 2018 is below the organisation’s 12 April estimate of 4.4 per cent. Whilst Roberto Azevêdo, director general of the WTO, describes trade growth as “remaining strong”, he believes this downgrade “reflects the heightened tensions that we are seeing between major trading partners.

“More than ever, it is critical for governments to work through their differences and show restraint,” observes Azevêdo. “The WTO will continue to support those efforts and ensure that trade remains a driver of better living standards, growth and job creation around the globe.”

Alexandre de Juniac, director general and chief executive (CEO) of IATA, echoes the concerns of the WTO chief. “Order books are weakening and supply delivery times are lengthening; and the growing trade tensions are a spectre over the industry,”

“The early focus of tariffs was not on products typically carried by air. But as the list of tariffs grows so does the air cargo industry’s vulnerability,” observes de Juniac.

“We can expect souring trading relations to eventually impact business travel. There are no winners in trade wars,” he concludes.

Trade policy measures are far from the only risk to the revised forecast, notes the WTO. Geopolitical tensions could threaten resource supplies and upset production networks in certain regions, for example, it notes.

The rebalancing of the Chinese economy away from investment and toward consumption are still present and could weigh on import demand due to the high import content of investment, warns the global trade watchdog.

Overall regional performance of international airlines

Apart from the African carriers, which saw their freight contract by 7.1 per cent in August this year, airlines across the world reported year-on-year demand growth, and that capacity growth had exceeded growth in demand.

Asia-Pacific airlines saw demand for airfreight grow by 1.6 per cent, whilst North American airlines’ cargo volumes expanded 2.8 per cent.

European carriers posted the fastest growth of any region in August, with an increase in demand of 3.7 per cent in comparison with the same period last year.

Middle Eastern airlines posted a 2.2 per cent increase in cargo and their Latin American counterparts experienced a rise in demand growth of 1.6 per cent.

Sources: IATA Economics, IATA Monthly Statistics

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