A look back at the cargo market – IATA Q4/2015 cargo chartbook synopsis


The year ends on a low note as IATA sums up air cargo performance in 2015 as ‘weak’. Some mild optimism is in the air, however, in the form of sustained recovery in the Eurozone. 

Compared to last year, the year-to-October growth measured in freight tonne kilometers (FTKs) was just 2.6 percent, reports International Air Transport Association (IATA) in its fourth-quarter chartbook. The small gains in volumes over the year, IATA says, are explained by the surge in activity in the first quarter.

In October 2015, year-on-year growth was just 0.5 percent in FTKs, and below the peak in world trade seen in December 2014. IATA predicts challenging times for Q4 and 2016 as well.

A tough global economic environment has suppressed air cargo demand as emerging markets – especially China – have been struggling. Advanced economies, on the other hand, continue their healthy expansion, albeit at a slower pace than expected.

IATA lists three key factors that weigh the global outlook: first, the US Federal Reserve is looking to tighten monetary policy. Second, China is embarking on a multi-year rebalancing trail, and third, the commodity super cycle that has lasted a decade appears to be over.

In addition, feeble world trade has tempered air cargo demand this year. Compared to last year, the year-to-September growth was just 1.5 percent. This cannot be explained by cyclical factors alone – structural factors, such as slowing pace of trade liberalization, may explain almost half of the slowdown. 

Inventory overhang in the US continues to restrain air cargo growth prospects. Semi-conductor shipments have sunk, pointing to weaker demand drivers in the short term. In the medium term, sluggish consumer confidence might be a cause for concern, even though lower oil prices still have the potential to stimulate consumer spending.

Capacity for wide-body freighters increased by 2.2 percent in Q3 compared to Q2. Furthermore, in-storage capacity remains at historically high levels. IATA says this is largely due to deliveries of new aircraft. 

Capacity addition has surpassed traffic growth by 3.6 percentage points during the first three quarters of 2015, which has led to international freight load factors to deteriorate. Carriers continue to optimize operations under lower oil prices which, in part, keeps load factors low. The simultaneous dip in freighter utilization and load factors may also point to underlying weakness in the demand environment.

Air cargo yields have remained flat in 2015, and some trade lanes have seen better results than others. Luckily, downward-facing yields will be less harmful to profitability as the fall in yields in 2014. Capacity increases, as noted above, will continue pressing yields downward.

Looking ahead, IATA predicts that difficult conditions will persist for air cargo. However, a stronger recovery in the Eurozone – a key market – can be a source of optimism as the industry enters 2016.

Summary by Maria Nokkonen

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

Published December 15, 2015

Category: Market updates