A look back at the cargo market – IATA Q3/2013 cargo chartbook synopsis


For every dark cloud there is a silver lining – The International Air Transport Association (IATA) reports some cheery news from cargo heads for the third quarter of 2013. 

While high jet fuel prices and slow world trade growth continue to depress the market, an improvement in forward looking demand indicators and an increase in business confidence are signs of improvement.

Confidence worldwide has made a notable shift. Consumer confidence in Europe is at its highest levels since 2011 and US consumer optimism continues to increase. However, while things are improving on two continents that have not shown much increase in confidence over the last few quarters, some of this improvement is being counteracted by a slowdown in the Chinese economy.
Even more disappointing is that the better demand conditions are being offset by capacity increases, which have caused yields to decline. Cargo heads surveyed in July 2013 for the IATA Cargo eChartbook Q3 fear the trend could continue if future demand fails to meet capacity expansion in the coming months.
These results in the demand environment and demand drivers can particularly be reflected in the global economic situation. The economic outlook for 2013 remains weak, despite recent positive improvements in the euro zone. Even with the recent slowdown in China, economic growth in Asia Pacific is expected to exceed growth in advanced economies. 
Growth in emerging economies – supported by relatively looser fiscal policies – continues to outpace expansion in developed regions. The most positive forward-looking indicator for world trade growth and air freight demand is that there has been an improvement in new export order growth.
Freight load factors remain weak as capacity continues to rise, and the decline in air freight rates has increased in recent months. At the same time, sea freight rates have dropped dramatically, reflecting a weakening demand for sea transport. However, the fact there has been no growth in the freighter fleet has limited any further decline in aircraft utilization rates, which is good news.
Cargo profitability continues to face downward pressure from high input costs, specifically jet fuel prices, which surged at the end of summer due to geopolitical factors. Yields also continue to weaken. Despite the slight improvement in air freight demand over recent months, capacity growth has kept load factors low.  
Overall, cargo heads are broadly optimistic for the third quarter, mainly due to the improvement in the demand backdrop. Companies will most likely see an increase in traffic volumes over the next 12 months but yields will remain unchanged.
Cargo market analysis chartbooks are published quarterly on IATA website.
Text by Jacy Meyer

Published October 10, 2013

Category: Market updates