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Pace of Air Cargo Growth Slows Amid Trade Uncertainty

Fluctuations in air cargo demand and patterns are reflecting the uncertain state of global trade.

Global air freight demand, measured in freight ton kilometers (FTKs), rose 2.3% in August compared to a year earlier. But the pace of growth was unchanged from the previous month, and at 2.3% was less than half the five-year average growth rate of 5.1%, according to the International Air Transport Association (IATA).

Freight capacity, measured in available freight ton kilometers (AFTKs), grew 4.5% year-over-year in August. This was the sixth straight month that capacity growth outstripped demand growth.

IATA said strong consumer confidence, an upturn in the global investment cycle and growing international e-commerce are driving demand, but several factors are also having a negative impact. The challenges include a broad weakening in manufacturing firms’ export orders in Europe, China, Japan and South Korea; longer supplier delivery times reported by manufacturers in Asia and Europe (meaning they have less need for the speed afforded by air freight); and risks to global trade from the recent escalation in trade tensions.

“The early focus of tariffs was not on products typically carried by air, but as the list of tariffs grows so does the air cargo industry’s vulnerability,” said Alexandre de Juniac, IATA’s director general and CEO. “And, we can expect souring trading relations to eventually impact business travel. There are no winners in trade wars.”

All regions, except Africa, reported year-on-year demand growth in August, and all reported capacity growth exceeding demand growth.

Asia-Pacific airlines saw demand for air freight grow 1.6% in August compared to a year earlier. This was an increase over the previous month but a marked slowdown in growth from the past year, IATA noted, while cargo capacity increased 3.4%.

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“Weaker manufacturing conditions for exporters, particularly in Japan and China, have impacted the demand,” IATA’s monthly report said. “As the largest freight-flying region, carrying more than one-third of the total, the risks from protectionist measures are disproportionately high.”

Freight volume for North American airlines increased 2.8% year-over-year in August as capacity rose 3.2% in the same period. “The recent momentum of the U.S. economy and solid trade flows across the Atlantic have helped strengthen demand for air cargo, benefiting U.S. carriers,” IATA said. “A pickup in supply chain bottlenecks, which is typically alleviated by the speed of air freight, may also be benefiting the demand.”

European airlines posted the fastest growth of any region in August, with a 3.7% increase in demand over August 2017. While exports in the region weakened, notably in Germany, strong conditions on the transatlantic market and a pickup in demand between Europe and Asia helped boost international air cargo demand to an annualized rate of 8 percent over the past six months. European airline capacity increased by 5.2% year-over-year.

A slight reduction in the DHL Global Trade Barometer (GTB) was largely blamed on lower growth rates of air trade. The quarterly barometer declined four points to 63 on the previous quarter’s forecast, indicating a slightly slower pace of growth overall. In the GTB methodology, an index value above 50 indicates positive growth, while values below 50 suggest contraction.

The air trade measurement declined by eight points to 62. In contrast, the growth rate for global ocean trade fell one point to 63 points. Despite intensifying global trade disputes, mainly between the United States and China, these countries remain in growth mode, albeit at a slower pace, DHL said. U.S. growth prospects slowed by five points to 63. The Chinese trade outlook declined four points to 59.