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Global capacity expansions ahead of growth in demand
The performance of global air freight markets stabilised in August after two months of decline. Measured in freight tonne kilometres (FTK), air cargo volumes rose 0.2% compared to the same month a year ago. This is a modest improvement on July performance when freight demand contracted by 0.6% year-over-year.
The results varied widely by region. Carriers in the Middle East reported the most significant growth (10.4%) followed by African (2.3%) and European airlines (0.7%). The most significant negative impact on the global performance was by Asia-Pacific based airlines (-1.0%); and those in North America (-3.3%) and Latin America (-7.3%). All regions reported capacity expansions ahead of growth in demand.
The data, from IATA, illustrates that despite the ‘improvement’, and year to date figures 2.6% up on last year, all is not well. Total volumes are down 2.0% compared to the end of 2014. Some of the key reasons for the earlier weakness, for example, downgraded growth expectations in emerging Asia, and the rebalancing of the Chinese economy toward domestic consumption, remain. Even though world trade volumes have slightly picked up, the industry will have to work hard to match the strong finish to 2014.
Asia-Pacific carriers saw a fall in FTKs of 1.0% in August compared to August 2014, and capacity expanded 4.9%. The contraction was less severe than in July (-2.0%), although with the continued drop in export orders for Chinese manufacturing, it is hard to say if the decline has bottomed out. European carriers reported a rise in demand in August of 0.7% compared to a year ago and capacity rose 3.9%. Recent improvements in manufacturing business activity seem to be finally feeding through to support air freight demand.
North American airlines experienced a decline of 3.3% year-on-year and capacity grew 4.4%. Airlines in the region have experienced a significant fall in FTK volumes since the end of congestion at West Coast ports. More fundamentally any improvement in economic performance does not appear to be driving stronger air freight demand. Middle Eastern carriers saw the strongest growth with demand expanding by 10.4%, and capacity rising 14.3%. Although some economies in the region have suffered a slowdown in non-oil growth, overall expansion remains robust enough to sustain solid growth in air freight.
Latin American airlines reported a decline in demand of 7.3% year-on-year, and capacity expanded 0.8%. The large fall reflects the continued economic struggles of Brazil and Argentina, while regional trade activity has not created stronger air freight demand. African carriers experienced growth in demand of 2.3%, and capacity rose by 10.6%. Nigeria and South Africa, the largest economies in the region, have underperformed. Regional trade, however, has held up, and generated increases in air freight volumes.
Total freight traffic market shares by region of carriers in terms of FTK are: Asia-Pacific 38.5%, Europe 23.2%, North America 20.1%, Middle East 14.2%, Latin America 2.6%, Africa 1.5%.