A look back at the cargo market – IATA Q1/2016 cargo chartbook synopsis

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As global growth continued to perform below its potential in 2015, the cargo industry is getting used to “new mediocre growth,” reports the International Air Transport Association (IATA) in its latest Cargo Chartbook.

There is no way around it: air cargo performance in 2015 was weak. Measured in Freight Tonne Kilometers, year-on-year growth in December was just 1.4 percent. Compared to 2014, year-to-December growth was 2.2 percent. Global trade growth, with December levels up just 0.6 percent from a year ago, has been growing at a slower rate than air cargo.

Expansion rate of advanced economies has been slow. In the US, the sluggish growth is largely due to a sharp fall in investments in the energy sector, weather events and weaker export performance on the back of an appreciating US dollar. Underlying demand drivers, however, look positive as unemployment continues to fall.

Lower oil prices have aided the continued growth in the Eurozone, but weaker exports create headwinds. Emerging economies continue to grow below their potential, with India, a net commodity importer, being the best performing country.

In the short term, the decrease in semi-conductor shipments points to weaker demand drivers yet again. Consumer confidence has been strong, causing optimism in the medium term. Another bright points come in the form of falling unemployment in advanced economies along with prospects for favorable lagged impact of lower oil prices. 

In-service payload capacity for wide-body freighters increased for the fourth consecutive quarter. This is explained by a reduction of in-storage capacity and delivery of new aircraft as aircraft utilization is hovering near all-time highs. During the fourth quarter of 2015, in-service capacity grew by 1.6 percent compared to Q3, and 3.9 percent compared to Q4/2014. In-storage capacity, on the other hand, fell by 2.2 percent compared to Q3, and 9.5 percent compared to Q4/2014.

Industry-wide, air cargo yields have stayed flat in the fourth quarter. Jet fuel prices were some 9 percent lower in Q4 compared to Q3. Downward pressure on yields stems from the increase in wide-body freighter payload capacity and continued deliveries of belly capacity.

Looking ahead, IATA’s forecast for 2016 points to acceleration in air cargo growth. Nonetheless, even if growth in air cargo outperforms world trade, the weak economic recovery will subdue growth potential. 

Summary by Maria Nokkonen

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

 

Published March 21, 2016

Category: Market updates

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