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Trade Turmoil is Grounding Global Air Freight Demand, and the Decline Will Continue

Global air freight demand dropped 4.5 percent in September compared to a year earlier, marking the 11th consecutive month of year-on-year decline in freight volumes, the International Air Transport Association (IATA) said in its monthly analysis.

The current streak of monthly decreases is the longest since the global financial crisis in 2008.

Freight capacity rose by 2.1 percent year-on-year in September, with capacity growth now outstripping demand growth for the 17th consecutive month.

Air cargo continues to suffer from the trade wars between the U.S. and China, and South Korea and Japan, the overall deterioration in global trade and weakness in some key economic drivers, according to IATA. Global export orders continue to fall and the Purchasing Managers Index tracking new manufacturing export orders has pointed to declining orders since September 2018.

“The U.S.-China trade war continues to take its toll on the air cargo industry,” Alexandre de Juniac, IATA’s director general and CEO, said. “Trillions of dollars of trade is already affected, which helped fuel September’s 4.5 percent year-on-year fall in demand and we can expect the tough business environment for air cargo to continue.”

Airlines in Asia-Pacific, Europe, North America and the Middle East all experienced sharp declines in year-on-year growth in air freight volume in September, while Latin America carriers saw a more moderate decline. Africa was the only region to record growth in air freight demand compared to September 2018.

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Demand for air freight for Asia-Pacific airlines fell 4.9 percent in September from a year earlier, brought down by the U.S.-China and South Korea-Japan trade wars, along with the slowdown in the Chinese economy.

“More recently, the disruption to operations at Hong Kong International Airport–the largest cargo hub in the world–added additional pressure,” IATA said.

With the region accounting for more than 35 percent of demand as measured in freight ton kilometers, “this performance is the major contributor to the weak industrywide outcome,” IATA said.

North American airlines saw demand dip 4.2 percent in the month compared to September 2018.

“The U.S,-China trade war and falling business confidence continue to weigh on the region’s carriers,”  IATA said. “Freight demand has contracted between North America and Europe and between Asia and North America.”

European airlines suffered a 3.3 percent decline in freight demand in September year over year, as weaker manufacturing conditions for exporters in Germany, softer regional economies and ongoing uncertainty over Brexit impacted performance.

Freight volume for Middle Eastern airlines was down 8 percent in September compared to the year-ago period, representing the sharpest drop of any region. IATA said “escalating trade tensions and the slowing in global trade have affected the region’s performance due to its strategic position as a global supply chain link,” adding that “most key routes to and from the region have seen weak demand in the past few months.”

The large Europe to Middle East route was down 8 percent, and Asia to Middle East was down 5 percent year over year in August, the most recent data available.

Freight demand for Latin American airlines dipped 0.2 percent year over year in September. Despite indications of a recovery in the Brazilian economy, IATA said deteriorating conditions elsewhere in the region, along with a slowing in global trade, have impacted the region’s performance.

African carriers posted the fastest growth of any region in the month with a 2.2 percent year-over-year increase in demand, although this was a significant slowdown in growth from the 8 percent recorded in August. Strong trade and investment linkages with Asia and robust economic performance in some key regional economies contributed to the positive performance, IATA said.