A look back at the cargo market – IATA Q1/2017 cargo chartbook synopsis

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Good news for the air cargo market. In its latest Cargo Chartbook, the International Air Transport Association (IATA) reports a strong start to 2017 for year-on-year air freight growth.   

According to airline heads of cargo, the demand outlook for 2017 looks positive. Air freight volumes continued to trend upwards with air freight outperforming wider world trade since mid-2016. While industry-wide Freight Tonne Kilometers (FTKs) rose to 8.2 percent during the three months to February, the 1.3 percent quarter-on-quarter increase was down compared to the two previous periods. 
 
Traffic growth has been fastest on international segment-based routes within Asia, as well as between Asia and Europe. Asia Pacific and European airlines accounted for more than 70 percent of the annual growth in FTKs over the three months to February. Conversely, Latin American carriers reported a demand contraction for the fourth quarter in a row. 
 
Cargo throughput has increased at double-digit annual paces at a handful of key freight airports at the start of 2017, with Asia claiming the lion’s share of growth. By contrast, growth in cargo in the Middle East has been weaker.
 
The positive momentum in air freight growth can be contributed to an upturn in global economic conditions due to a rise in consumer confidence. This of course translates into higher consumer spending and thus a demand for air freighted goods. 
 
The global Purchasing Managers Index (PMI) for export orders remain healthy and are close to a six-year high. Traditional demand drivers for the air freight industry have also been robust. The quantity of silicon material shipments increased by 10.4 percent year-on-year last quarter – the fastest pace in two years. The timing of the Lunar New Year in January may have contributed to this higher demand. Another contributing factor to the increase in air cargo performance is the fall in business inventory-sales ratio in the US over the past nine months compared to sales. This has led to businesses relying more on air cargo to replenish stock.
 
So far this year, additional payload from wide-body belly has continued to exceed that from freighter-only deliveries. A total of 659 additional tonnes of capacity have been added to the freighter fleet. 
 
In terms of crude oil prices, these trended upwards during much of 2016, and are currently around 55 USD/bbl. The level is pretty much equal to that seen during 2011-2014, and markets expect prices to rise only gradually.
 
In regard to freight yield, the downward trend has stabilized. The fall in freight yields seen earlier this year reflects the usual seasonal pattern: adjusting for this shows that the downward trend in yields including fuel and other surcharges has stabilized, helped by the upward trend in the load factor.
 
All in all, the IATA cites a solid start to the year for air freight with demand growth accelerating, bolstered by encouraging export orders.
 
Summary by Shelly Nyqvist
 

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

Published April 25, 2017

Category: Market updates, Economy

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