IATA cargo chartbook 2016: critical market info Q1, Q2, Q3, Q4

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We've picked out the most important market information from IATA's quarterly cargo chartbooks in 2016 so you don't have to hunt down the report on IATA's website and trawl through the data to get the key takeaways.

Finnair Cargo summary: IATA Cargo Chartbook Q4 2016

Global economic growth is expected to accelerate moderately, meaning consumer confidence may boost air cargo demand this year reports the International Air Transport Association (IATA) in its latest Q4 Cargo Chartbook.

Despite a moderate deceleration in economic growth in 2016, there is solid growth in air cargo demand. Industry wide Freight Tonne Kilometers (FTKs) grew 3.8 percent last year, the second highest annual growth rate since 2010. In seasonally adjusted terms, the market is nearly 10 percent above the year end levels reached in 2015.

The year did start off weak for the air cargo market, but recovered and grew in the second and third. By the fourth quarter, growth accelerated further due to a pick-up in Asia and a more intense peak season. European and Asian carriers experienced the lion’s share of growth in Q4 with 61 percent and about 64 percent in 2016; Middle East and North American carriers accounted for 24 percent and 11 percent respectively of traffic growth in 2016. 

Interestingly enough, a contributing factor to the increase in air cargo performance has been the fall in business inventories compared to sales. This has led to businesses relying more on air cargo to replenish stock. The global Purchasing Managers Index (PMI) for export orders continues to remain in expansionary territory, translating into steady consumer confidence.

Expansion of in-service payload capacity for wide-body freighters continued to increase for the seventh consecutive quarter. This is explained by a reduction of in-storage capacity and delivery of new freighter aircraft. Payload capacity available in storage stood at 13 percent of in-service payload capacity. During the fourth quarter of 2016, payload wide-body freighter capacity delivered was the largest within a quarter over the past three years.

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. 

Last year was a record year for delivered wide-body payload belly capacity. And on some trade lanes, this has had a substantial impact on the dynamics in the air cargo market. 

AFTKs grew 5.3 percent in 2016, outpacing FTK growth by 1.5 percentage points the previous year. For the first time since Q4 of 2013, demand has outstripped supply. This may seem like a welcome development for carriers, however analysts fear it may be short lived.

At an industry level, total international air cargo yields have continued to deteriorate when compared to year-on-year terms. Yields in Q4 of 2016 were on average about 6 percent lower over the same time period. In parallel, jet fuel prices were on average about 8 percent higher. Unfortunately, the rise in input costs combined with decreasing unit revenues points to worsening profitability outlook for air carriers.

Again, the IATA cites concerns over yield performance for the year ahead noting that an increase in capacity amid a weak global trade backdrop is a key risk for air cargo profitability.

Finnair Cargo summary: IATA Cargo Chartbook Q3 2016

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 Q3 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.

Finnair Cargo summary: IATA Cargo Chartbook Q2 2016

Air cargo performance is not as bleak as anticipated despite the repercussions of the Brexit vote and a sluggish trade outlook reports the International Air Transport Association (IATA) in its latest Q2 Cargo Chartbook.

As the world waited with bated breath for the Brexit vote, global economic growth was weak but positioned for a moderate improvement. However, the vote reversed expectations with forecasts revised downward from what was projected to be lackluster growth.

That said, the air cargo market grew slightly in the second quarter. June levels point to year-on-year growth of 4.1 percent in Freight Tonne Kilometers (FTK). Compared to 2015, volume growth for the same period was 0.5 percent. 

The second quarter saw strong growth in trade by air on the Europe-Asia trade lane. Middle Eastern carriers report the largest share (36%) of Q2 growth, while Asian and European carriers represent 32 percent and 20 percent respectively. In contrast, growth has been slow for Latin American carriers as regional trade and macroeconomic weakness has led to a decrease in traffic.

Global merchandized trade has continued to contract in 2016, with monthly trade levels falling perpetually every month. The level in May was down by 1.6 percent compared to the 2015 year-end level. The good news is that international FTK growth has fared better. In the second quarter, air cargo recovered from a weak first quarter. The level in May was up by 1.7 percent and 2.2 percent in June compared to the 2015 year-end level. 

The improving trend, although still weak, is a positive development for air freight. In the short term, the decrease in semi-conductor shipments points to weaker demand drivers yet again. The confluence of a sluggish world trade outlook, Brexit aftermath and weak demand drivers suggest that the positive momentum observed in FTKs throughout this quarter may lag a bit.

Regardless, another bright point comes in the form of consumer confidence, which has continued to improve. Strength in this and prospects for favorable lagged impact of lower oil prices can reenergize growth in the global economy.  

Furthermore, in-service payload capacity for wide-body freighters increased for the fifth consecutive quarter. This is explained by a reduction of in-storage capacity and delivery of new aircraft. Payload capacity available in storage remains high at 17.5 percent of in-service payload capacity, significantly above pre-crisis levels of 2007 when it was 10.5 percent. During the second quarter of 2016, in-service payload capacity grew by 4.1 percent compared to Q2 in 2015. In contrast, FTK growth over the same period was just 2.8 percent.

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 in hull capacity. 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 with the latest likely to be damaging to profitability. This unfortunately comes at a time of increasing fuel prices. Average fuel prices were 43 percent higher in June compared to the beginning of the year.

Although the forecast reads mixed for the year ahead, IATA notes that a weak global trade backdrop and rising fuel costs may well take a bite out of air cargo profitability. 

Finnair Cargo summary: IATA Cargo Chartbook Q1 2016

 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 Q1 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. 

Published April 26, 2018

Category: Market updates

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