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Air Freight Falls Again Amid Trade Dispute, but Declines Seen Easing

The difficult business climate for air freight continued in May, as the ongoing U.S.-China trade war took its toll on exports. But there are some signs of an updraft.

The International Air Transport Association (IATA) reported Wednesday that global air freight measured in freight ton kilometers (FTKs) decreased 3.4 percent in May compared to the same period in 2018, which marked a slight improvement on the 5.6 percent decline posted in April.

In seasonally adjusted terms, IATA said the level of FTKs increased modestly for the third consecutive month, suggesting the low point of this cycle could have passed, although the market remained weak.

Freight capacity rose 1.3 percent year-on-year in May, and capacity growth has now outstripped demand growth for the 13th consecutive month.

Air cargo demand has suffered from soft global trade volumes and trade tensions between the U.S. and China, according to IATA’s monthly report, and this has contributed to declining new export orders. The indicator for new manufacturing export orders, part of the global Purchasing Managers Index, has reflected falling orders since September.

“The impact of the U.S.-China trade war on air freight volumes in May was clear,” Alexandre de Juniac, IATA’s director general and CEO, said. “It’s evidence of the economic damage that is done when barriers to trade are erected. Renewed efforts to ease the trade tensions coming on the sidelines of the G20 meeting are welcome. But even if those efforts are successful in the short-term, restoring business confidence and growing trade will take time, and we can expect the tough business environment for air cargo to continue.”

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Airlines in Asia-Pacific and the Middle East suffered sharp declines in air freight volume year-on-year in May, while North America and Europe experienced more moderate decreases. Africa and Latin America each recorded growth in air freight demand compared to May 2018.

Asia-Pacific airlines saw demand for air freight fall 6.4 percent in the month.

“The U.S.-China trade war and weaker manufacturing conditions for exporters in the region have significantly impacted the market,” IATA said. “With the region accounting for more than 35 percent of total FTKs, this performance is the major contributor to the weak industry-wide outcome.”

North American airlines saw demand decrease 1.6 percent in May, as capacity increased 1.4 percent over the past year.

“The recent easing of growth again can be partly attributed to the falling global trade volumes and U.S.-China trade tensions,” according to IATA. “International FTKs between Asia and North America have fallen by almost 8 percent in year-on-year terms.”

European airlines posted a 0.2 percent decrease in freight demand in May compared to a year earlier, a significant improvement from the 6.9 percent contraction in April. Weaker manufacturing conditions for exporters in Germany, indications of a slowing in the regional economy, and ongoing uncertainty over Brexit have impacted the recent performance, IATA noted.

Middle Eastern airlines’ freight volumes fell 6.9 percent in the month. A downward trend in seasonally adjusted international air cargo demand, with weakening air freight volume to and from North America and Asia Pacific contributing to the softer performance, the report noted.

Latin American airlines saw a 2.7 percent increase in freight demand growth in the month and capacity increased by 6.6 percent. IATA attributed the gain to a “healthy performance in the region’s domestic air cargo markets.”

African carriers posted the fastest growth of any region in May, with an 8 percent gain in demand. The upward trend in volume in the region has been evident since mid-2018 and makes Africa the strongest performer for the third consecutive month.

“Strengthening trade and investment linkages with Asia have underpinned a double-digit increase in air freight volumes between the two regions over the past year,” IATA said.