A look back at the cargo market – IATA Q1/2014 cargo chartbook synopsis

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An optimistic consumer attitude in the US and Europe is leading airline cargo heads to have a positive outlook for 2014. In the IATA Cargo E-Chartbook Q1/2014, executives report that despite the continued high price of jet fuel and weakness in yields, they expect traffic growth to increase and yields to at least remain stable.

Business confidence is the main driver of this optimism; consumers in Europe and the US are becoming increasingly more confident about the economic outlook which has translated into a rise in demand for air-freighted commodities like semi-conductors. 

Global economic developments have been generally positive in recent months, and conditions in both advanced and emerging economies are expected to continue to improve. This positivity comes from different areas; in the US, loosening bank lending standards will help support US growth of 3% in 2014 while in the Euro Area modest rates of growth of around 1.5% is expected which is significant when recalling the contraction and near stagnation of past years. However, in neither the US nor Europe, will growth rates come close to those in emerging market economies because of tightening fiscal policy in both those economic areas. 

Air freight markets have also been improving over recent months thanks to developments in business conditions, but rates of expansion are still weak on some major routes, including those connected to Asia. As production has been on-shored – partly due to market factors such as rising wages in low- cost economies and partly due to a recent rise in protectionist measures – we are not seeing an increase in international trade. 

Because of the business confidence, the demand environment is still positive and demand drivers are expected to improve. Consumer confidence is either remaining stable (as in China) or growing (Europe). It is a different story in Japan and the UK as their improving economic performance has encouraged an increase in capital expenditure by local companies. 

Freight load factors and aircraft utilization rates are both back on track after declining for most of 2013. Downward pressure on aircraft utilization rates in 2014 is expected due to the expected increase (19%) of deliveries of new twin-aisle aircraft. This will add almost 8% to the existing wide-body fleet.  

Air freight yields are continuing to hurt cargo business financial performance, although jet fuel prices, while still high, have remained relatively stable. Overall though, the air freight outlook is positive because of an improvement in the demand backdrop. Heads of cargo surveyed in January 2014 for the IATA Q1 report expect the year to bring an increase in traffic volumes and yields to remain stable.

Cargo market analysis chartbooks are published quarterly on the IATA website.

 
Text by Jacy Meyer
 

Published March 25, 2014

Category: Market updates

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