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August 2018 IATA Air Freight Market Analysis
Cargo volumes trending upwards modestly, amid mixed drivers

Highlights of the August 2018 Air Freight Market Analysis

  • Industry-wide freight tonne kilometres (FTK) grew by 2.3% year-on-year in August – an unchanged pace from July. The recent slowdown in FTK growth is typical with the pattern normally seen following inventory-led upturns.
  • Freight volumes are currently trending upwards at a 4% annualized rate, helped by strong levels of consumer confidence and an ongoing upturn in the global investment cycle. Nonetheless, other demand drivers have become more mixed since the start of 2018, particularly the health of manufacturer firms’ export order books.
  • The industry load factor fell in annual terms for the sixth month in a row, although yields appear to be holding up. 

Ongoing weakness in African FTK growth
Year-on-year growth in international FTKs flown by African airlines remained in negative territory in August for the fifth time in six months (-6.8%). Having peaked in SA terms at the end of last year, FTKs look to have stopped declining in SA terms in recent months, although they remain 8% lower than their recent November 2017 peak. Demand conditions remain weak on all the key markets to/from the continent.

The recent slowdown in FTK growth is typical of that following an inventory-led upturn…

Industry-wide FTKs increased by 2.3% year-on-year in August – unchanged from the rate in July and less than half the five-year average pace (5.1%). As we have noted before, the main factor behind the slowdown in annual FTK growth since mid-2017 has been a much-reduced boost from the inventory restocking cycle. Recall that growth in air freight volumes outpaced that of global goods trade by a wide margin last year as firms turned to air freight from other modes of transport to restock inventory levels quickly. Amid signs that the inventory restocking cycle peaked in late-2017, the slowdown in FTK growth is a typical pattern, consistent with similar periods in the past.

Despite the slowing in annual FTK growth, it is important to note that freight volumes have continued to trend upwards in seasonally adjusted (SA) terms during 2018, with FTKs currently rising at a 4% annualized rate. Admittedly, this is well below the double-digit rates of 2016/17, but is still faster than the average pace over the past decade. The upward trend is being supported by factors including strong levels of consumer confidence, an ongoing upturn in global investment, as well as demand in fast growing areas such as e-commerce.

…but demand drivers have become more mixed

That said, other demand drivers of air freight have become more mixed since the start of the year – particularly a weakening in the health of manufacturing firms’ export order books. While the new export orders component of the global manufacturing Purchasing Managers’ Index (PMI) is still just above the 50-mark that is consistent with growing orders, at current levels, the indicator suggests that annual FTK growth is unlikely to pick up strongly soon.
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