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Air Freight Demand Rose in May, But Pace of Growth Seen Slowing

Air freight demand rose 4.2% in May, measured in freight tonne kilometers (FTKs), compared to a year earlier, but was down from the 5.2% annual increase in April, according to the International Air Transport Association’s (IATA) monthly report.

Freight capacity, measured in available freight ton kilometers (AFTKs), grew 6.2% year-on-year in May. This was the fourth month in a row that capacity growth outstripped demand growth, IATA said.

The organization, which represents about 290 airlines comprising 82 percent of global air traffic, said after a weak start to 2018, demand for global air freight has resumed a modest trend upward. But the rapid growth seen in 2017 is history, with demand growing at a significantly slower pace this year. In IATA’s mid-year industry outlook, 2018 freight growth was revised downward to 4 percent compared to the 4.5% it forecast in December.

IATA said there are three indications that growth will continue at a slower pace. The first is that the re-stocking cycle that required quick delivery to meet customer needs seems to have faded. In addition, the new export orders component of the global manufacturing Purchasing Managers’ Index is at a 21- month low, while global trade appears to be softening as trade tensions increase.

“We expect air cargo demand to grow by a modest 4 percent in 2018,” Alexandre de Juniac, IATA’s director general and CEO, said. “That’s an uptick from a very weak start to the year. But headwinds are strengthening, with growing friction among governments on trade. We still expect demand to grow, but those expectations are dampened with each new tariff introduced. Experience tells us that trade wars, in the long run, only produce losers.”

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All regions except Africa reported an increase in air freight growth in May, IATA reported. Asia-Pacific airlines saw freight demand increase 4.9% compared to May 2017, while capacity increased 7.4%.

“As the largest freight-flying region, carrying close to 37 percent of global air freight, the risks from protectionist measures impacting the region are disproportionately high. That said, there are signs that demand is accelerating for international FTK’s,” IATA said.

North American airlines’ freight volumes expanded 5.9% in May year-to-year, as capacity increased 5.4%. “The recent momentum of the U.S. economy and the U.S. dollar has helped strengthen demand for air imports,” according to IATA.

European airlines posted a 2.3% increase in freight volume in May, down from the 3.5% rate of growth the previous month. Capacity increased 6 percent. Seasonally adjusted volumes rose slightly over the past two months, but the annualized rate of growth over the past six months remains at just 1.5%.

Middle Eastern carriers’ freight volume rose 2.4% in May, representing a significant deceleration in demand of more than 6.9% the previous month. IATA noted that the decline mainly reflects an unusual surge from a year ago rather than a substantive change in the current freight trend. Seasonally adjusted freight volumes continue to trend upward at a comparatively modest pace by the region’s standards, IATA said, which is consistent with signs of a broader moderation in global trade. Capacity in the region increased 3.3%.

Latin American airlines experienced an 11.4% rise in demand in May, the largest increase of any region for the third consecutive month, while capacity increased 1.5%.

“The pick-up in demand over the last 18 months comes alongside signs of economic recovery in the region’s largest economy, Brazil. Seasonally adjusted international freight volumes surpassed the May 2014 peak this month,” IATA said.

African carriers saw freight demand fall 2 percent in May compared to the same month last year, while capacity increased 20.4%.

“After a surge in international FTK volumes last year, seasonally adjusted international freight volumes have now trended downward at an annualized pace of 15 percent over the past six months,” the report added. “This mainly reflects a softening in demand on markets to and from Asia and the Middle East.”

Separately, World ACD reported that global air cargo yield—which measures average earnings an airline makes transporting cargo per mile or kilometer—fell 3 percent to $1.88 in May from April, but was still 14 percent above May 2017.