A look back at the cargo market – IATA Q3/2016 cargo chartbook synopsis


As world trade points to a moderate deceleration in growth rate, air cargo performance is expected to outperform reports the International Air Transport Association (IATA) in its latest Cargo Chartbook.

The air cargo market recovered from a weak first quarter and grew in the second and third. September levels point to year-on-year growth of 6.1 percent in Freight Tonne Kilometers (FTKs). Compared to 2015, FTK volume growth was only 2 percent. 

European and Asian carriers experienced the lion’s share of growth in Q3 with 77 percent, while North American carriers contributed with the third largest share of the pie. Middle East carriers experienced a decline in the volume of traffic handled this quarter compared to last quarter. 

And although there was an uptick in August, trade volumes in global merchandise has been flat. It’s too early to predict whether this uptick is a turning point for trade performance, but leading indicators, such as FTK growth, give hope for cautious near-term optimism. 

Fortunately, international FTK growth has fared better. In seasonally adjusted terms, air cargo had a weak first quarter with the market shrinking by 1.4 percent at the end of March compared to the 2015 year end level. In Q2 it recovered and grew, up by 2.5 percent and at the end of this quarter it was up by 5.6 percent compared to the 2015 year-end level. 

Expansion of in-service payload capacity for wide-body freighters increased for the sixth consecutive quarter. This is explained by a reduction of in-storage capacity and deferral in retirements. Payload capacity available in storage remains high at 14 percent of in-service payload capacity. During the third quarter of 2016, in-service wide-body freighter payload capacity grew by 3.6 percent compared to the same quarter last year.

And just as last quarter, the capacity challenge is further exacerbated by the strong growth in demand in the passenger business. Deliveries of wide-body passenger aircraft have led to a significant increase of belly capacity. However, despite a marked decrease in the number of wide-body passenger aircraft expected to be delivered this year, the decrease in wide-body payload belly capacity being delivered will not be material. On some trade lanes, though, this has had a positive impact on the dynamics in the air cargo market. 

At an industry level, total international air cargo yields have continued to deteriorate, and as reported last quarter, the latest likely to be damaging to profitability. Yields in September were 9 percent lower than they were in September 2015. In contrast, average jet fuel prices were only 8 percent lower over the same time period, explaining less than half the fall in yield. In spite of this, fuel prices continue to rise aided by an OPEC agreement to cut production.

IATA cites concerns over yield performance for the year ahead noting that flooding-in capacity amid a weak global trade backdrop and rising fuel costs are key risks for air cargo profitability.

Summary by Shelly Nyqvist

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

Published October 27, 2016

Category: Market updates