AIRFREIGHT profit margins continue to be buffeted by the intensifying trade war between the USA and China, tumbling export orders since September 2018, and stagnant global trade, writes Thelma Etim.
Air cargo bosses trying to increase their profitability amidst an unpredictable global economy and political unrest, such as the Hong Kong protests and Brexit – in key cargo markets, will not be surprised by the depressing data from the International Air Transport Association (IATA).
Demand, measured in freight tonne kilometres (FTKs), decreased by 4.5 per cent in September 2019, in comparison with the same period in 2018 – marking the eleventh consecutive month of year-on-year decline in freight volumes, the longest slowdown since the global financial crisis in 2008, IATA reveals.
Freight capacity, measured in available freight tonne kilometre (AFTKs), rose by 2.1 per cent year-on-year in the month. Capacity growth has now outstripped demand growth for the 17th consecutive month, says the association.
Alexandre de Juniac, the director general and chief executive of the International Air Transport Association, expects the “tough business environment for air cargo” will continue.
Airlines in Asia-Pacific, Europe, North America and the Middle East suffered sharp declines in year-on-year growth in total airfreight volumes
“The US-China trade war continues to take its toll on the air cargo industry. October’s pause on tariff hikes between Washington and Beijing is good news. But trillions of dollars of trade is already affected, which helped fuel September’s 4.5 per cent year-on-year fall in demand.”
A regional breakdown shows airlines in Asia-Pacific, Europe, North America and the Middle East suffered sharp declines in year-on-year growth in total airfreight volumes in September 2019, whilst Latin American carriers experienced a more moderate decline. Africa was the only region to record growth in airfreight demand in comparison with September of last year.
Asia-Pacific airlines saw demand for air cargo contract by 4.9 per cent in September 2019. The US-China and South Korea-Japan trade wars, along with the slowdown in the Chinese economy, have significantly impacted this region. More recently, the disruption to operations at Hong Kong International Airport – the largest aire cargo hub in the world – brought additional pressure. With the region accounting for more than 35 per cent of total global FTKs, this performance is the major contributor to the weak industry-wide outcome. Airfreight capacity increased by 2.7 per cent over the past year, explains IATA.
North American airlines saw demand decrease by 4.2 per cent in September. Capacity increased by 1.9 per cent. The US-China trade dispute and falling business confidence continue to weigh on the region’s carriers. Freight demand has contracted between North America and Europe and between Asia and North America.
European airlines posted a 3.3 per cent decrease in freight demand in the month. Weaker manufacturing conditions for exporters in Germany, softer regional economies, and ongoing uncertainty over Brexit, have impacted the recent performance, observes IATA. Capacity increased by 3.3 per cent year-on-year.
Middle Eastern airlines’ freight volumes decreased by a substantial eight per cent – the sharpest drop in freight demand of any region. Capacity decreased by 0.4 per cent. Escalating trade tensions and the slowing of global trade have affected the region’s performance due to its strategic position as a global supply chain link, says IATA. Most key routes to and from the region have seen weak demand in the past few months. The large Europe to Middle East and Asia to Middle East routes were down eight per cent and five per cent respectively in August (the last data available) in comparison with a year ago.
Latin American airlines experienced a decrease in freight demand of 0.2 per cent and a capacity decrease of 2.9 per cent. Despite indications of a recovery in the Brazilian economy, deteriorating conditions elsewhere in the region along with a slowing in global trade have affected the region’s performance.
African carriers posted the best growth of any region in September 2019, with an increase in demand of 2.2 per cent in comparison with the same period a year earlier, although this was a significant slowdown in growth from the eight per cent recorded in August. Strong trade and investment linkages with Asia and robust economic performance in some key regional economies contributed to Africa’s positive performance. Capacity grew 9.4 per cent year-on-year, adds the association.
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