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Shrinking Demand Clips Air Cargo’s Wings

Global air cargo demand continued to track at near pre-pandemic levels in July, but below its year-ago performance, the International Air Transport Association (IATA) revealed in a new report.

Global demand fell 9.7 percent for the month compared to July 2021, while demand stood 3.5 percent below July 2019. Capacity was 3.6 percent above July 2021, but still 7.8 percent below 2019 levels, according to the group based in Montreal, Canada.

IATA said several factors in the operating environment contributed to the results. New export orders, a leading indicator of cargo demand, decreased in all markets except China, which began a sharp upward trend in June as the country reversed Covid lockdowns and restrictions that limited manufacturing output. The war in Ukraine continues to impair cargo capacity used to serve Europe, as several airlines based in Russia and Ukraine were key cargo players.

In addition, global goods trade continued to recover in the second quarter and the additional easing of Covid-19 restrictions in China should boost recovery in coming months. While maritime will be the main beneficiary, air cargo is set to receive a boost, as well. Lululemon for one, however, said it’s relying less on planes to fly in goods as suppliers’ on-time performance improves. Chico’s reported an 85 percent year-on-year drop in second-quarter air freight costs, suggesting a shift in its logistics strategy.

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“Air cargo is tracking at near 2019 levels, although it has taken a step back compared to the extra-ordinary performance of 2020-2021,” said Willie Walsh, IATA’s director general. “Volatility resulting from supply chain constraints and evolving economic conditions has seen cargo markets essentially move sideways since April. July data shows us that air cargo continues to hold its own, but as is the case for almost all industries, we’ll need to carefully watch both economic and political developments over the coming months.”

Looking at regional performances, Asia-Pacific airlines saw their air cargo volumes descend 9 percent in July compared to the same month in 2021, a significant decrease over the 2.1 percent decline in June.

“Airlines in the region continue to be impacted by the conflict in Ukraine, labor shortages, and lower levels of trade and manufacturing activity due to Omicron-related restrictions,” IATA said. “The scale of the decrease indicates volatility in volumes, as pent-up demand from the last Omicron-related lockdowns in China should prevent such notable declines in volumes.”

Available capacity in the region increased 2.7 percent over July 2021.

North American carriers posted a year-over-year 5.7 percent drop off in cargo volume in July, an improvement over the 13.5 percent decline in June. The lifting of restrictions in China is expected to boost demand in the coming months, IATA noted. Capacity was up 4.2 percent compared to July 2021.

European airlines saw a 17 percent decrease in cargo volume in July from  a year earlier, the worst performance of all regions for the third month in a row. IATA said this was attributable to the war in Ukraine, as well as labor shortages and lower manufacturing activity in Asia due to Omicron. Capacity increased 0.9 percent year over year in July.

Middle Eastern carriers experienced a 10.9 percent year-on-year decrease in cargo volume in the month. Significant benefits from traffic being redirected to avoid flying over Russia failed to materialize and stagnant cargo volumes to and from Europe impacted the region’s performance, IATA noted. Capacity was up 4.9 percent.

Latin American airlines reported a 9.2 percent increase in cargo volume in July, the strongest performance of all regions.

“Airlines in this region have shown optimism by introducing new services and capacity, and in some cases investing in additional aircraft for air cargo in the coming months,” IATA said.

Capacity in July was up 21.4 percent compared to the same month in 2021.

African airlines saw cargo volume decline 3.5 percent in the month from a year earlier. This was significantly slower than the 9.7 percent growth recorded the previous month. Capacity was 2.2 percent below July 2021.