The International Air Transport Association (IATA) released data for global air freight markets showing that demand, measured in freight tonne kilometers (FTKs), rose 2.0% in September 2018, compared to the same period the year before. This pace of growth was relatively unchanged from the previous month but was less than half the five-year average growth rate of 5.1%.
Freight capacity, measured in available freight tonne kilometers (AFTKs), grew by 3.2% year-on-year in September 2018. This was the seventh month in a row that capacity growth outstripped demand. Yields, however, appear to be holding up.
The weak growth is being supported by strong consumer confidence, a robust global investment environment and the expansion of international e-commerce. The air cargo sector is, however, being weighed down by a softening of key demand drivers:
There has been a global contraction in manufacturing firms’ export order books – the first since June 2017. Specifically, export order books contracted in all the world’s major exporting nations in September with the exception of the USA.
Longer supplier delivery times are being reported by manufacturers in most of Asia and Europe, the top two global trading areas by volume. This typically means that they have less need for the speed afforded by air freight.
"Demand for air cargo grew 2% in September—well below the five year average of 5.1%. Weakening order books and longer delivery times are undercutting the need for air freight in many traditional markets. But there is also some positive news. For example, strong consumer confidence goes hand-in-hand with expanding international e-commerce trade to give air cargo a boost. The bigger message for the sector is the need to modernize processes. There is some progress with the electronic air waybill becoming the default document on enabled trade lanes from 2019. But there is much more that must be done with governments and the supply chain to bring air cargo processes into the modern era," said Alexandre de Juniac, IATA's Director General and CEO.
September 2018 (% year-on-year)
¹% of industry FTKs in 2017 ²Year-on-year change in load factor ³Load factor level
All regions reported year-on-year demand growth in September 2018, except Africa which contracted.
Asia-Pacific airlines saw demand for air freight grow by 1.2% in September 2018 compared to the same period last year. This was a slight decrease from the previous month. Weaker manufacturing conditions for exporters, particularly in Japan, China and Korea impacted the demand as did disruptions to freight operations from typhoon activity. As the largest freight-flying region, carrying more than one-third of the total, the risks from protectionist measures are disproportionately high. Capacity increased by 1.2%.
North American airlines’ freight volumes expanded 1.5% in September 2018 compared to the same period a year earlier. Capacity increased by 4.9% over the same period. The recent momentum of the US economy and strong consumer spending have helped bolster the demand for air cargo, benefiting US carriers. However, international air cargo demand declined sharply in September. This contributed to year-on-year cargo demand falling to a 28-month low of 1.5% in September.
European airlines posted a 1.5% increase in freight demand in September 2018 compared to the same period a year earlier. Capacity increased by 0.9% year-on-year. International air cargo demand declined sharply in September. This contributed to year-on-year international air cargo demand falling to a 30-month low of 1.2% in September. As with the North American slowdown, it is too soon to say if this is the start of a wider weakening in demand.
Middle Eastern carriers’ posted the fastest growth of any region in September 2018, with an increase in demand of 6.6% compared to the same period a year earlier. This was more than double the pace of growth of other regions. There are tentative signs of a pick-up in seasonally adjusted air cargo demand supported by more trade to/from Europe and Asia. Capacity grew 7.7% year-on-year.
Latin American airlines experienced an increase in freight demand growth in September 2018 of 2.9% compared to the same period last year and capacity increased by 4.3%. Some of the smaller markets within the region have seen strong growth in international freight volumes so far this year. Nevertheless, the broader pick-up in demand seen over the last 19 months has now paused.
African carriers saw freight demand contract by 2.1% in September 2018, compared to the same month last year. This was the sixth time in seven months that demand contracted. Capacity increased by 6.2% year-on-year. After a peak in demand at the end of 2017, seasonally-adjusted international freight volumes have stopped declining and recovered sharply in recent months. However, they remain 6% lower than the November 2017 peak. Demand conditions on all key markets to/ from Africa remain weak.
Geneva - The International Air Transport Association (IATA) announced global passenger traffic results for September showing that demand (measured in revenue passenger kilometers, or RPKs) rose 5.5% compared to the same month in 2017. This was a slowdown from the 6.4% growth recorded in August year-over-year. Capacity climbed 5.8% and load factor slipped for the first time in eight months, down 0.3 percentage point compared to the year-earlier period, to 81.4%.
IATA estimated that impacts from severe hurricane and typhoon activity in September shaved around 0.1-0.2 percentage point off expected growth. However, even after accounting for these impacts, monthly traffic demand was below the 6.7% year-to-date pace.
“While September’s traffic growth was in line with the long-term average, it represents a moderation compared to recent months. This is likely owing to the anticipated reduced demand boost from lower airfares due to rising airline cost pressures, particularly fuel. Heightened uncertainty about trade policies and mounting protectionist policies may also be having an impact,” said Alexandre de Juniac, IATA’s Director General and CEO.
September 2018 (% year-on-year)
1% of industry RPKs in 2017 2Year-on-year change in load factor 3Load factor level
International Passenger Markets
International RPKs climbed 4.9% with airlines in all regions recording growth compared to 2017. Total capacity climbed 5.1%, and load factor dipped 0.1 percentage point to 81.2%.
Asia-Pacific airlines’ traffic rose 5.4% in September compared to the year-ago period. This was down from 7.4% annual growth in August. The steep decline in part reflects the impacts of typhoon activity in the region including the multi-day closure of Kansai International Airport. Capacity increased 4.3%, and load factor climbed 0.9 percentage point to 79.2%.
European carriers saw September RPKs rise 5.2% over September 2017, in line with August growth of 5.4%. However, the upward trend in seasonally-adjusted demand has slowed considerably since early 2018. Capacity climbed 4.9% and load factor edged up 0.2 percentage point to 87.0%, which was the highest among regions.
Middle East carriers had a 1.8% rise in demand, which was a four-month low. As in previous months, the volatility in the region’s growth rate mainly reflects the developments in 2017 such as the cabin ban on large portable electronic devices and the proposed travel bans to the US. Capacity rose 5.3%, and load factor fell 2.4 percentage points to 72.3%.
North American airlines experienced a 5.0% rise in demand in September, which was an increase over 3.7% year-over-year growth recorded in August. Capacity rose 5.4% and load factor fell 0.3 percentage point to 80.8%. Strong momentum in the US economy is helping underpin a pick-up in international demand for airlines in the region.
Latin American airlines’ demand surged 7.0%, strongest among regions and well above the 4.4% growth recorded in August. Traffic is staging a modest recovery from softness over the summer months that coincided with the general strikes in Brazil. Capacity climbed 9.8% -- also the biggest increase among regions -- and load factor fell 2.1 percentage points to 80.3%.
African airlines posted a 6.0% rise in RPKs in September, down from 6.8% in August. Capacity rose 4.9% and load factor edged up 0.8 percentage point to 74.6%. The healthy growth is taking place against an increasingly challenging economic backdrop for the region’s largest economies, South Africa and Nigeria.
Domestic Passenger Markets
Domestic demand climbed 6.5% in September compared to September 2017, which was a slowdown compared to 7.5% year-over-year growth in August. This was partly owing to afore-mentioned weather-related disruptions. Capacity rose 7.4% and load factor slipped 0.6 percentage point to 81.6%.
September 2018 (% year-on-year)
1% of industry RPKs in 2017 2Year-on-year change in load factor 3Load factor level *Note: the seven domestic passenger markets for which broken-down data are available account for 30% of global total RPKs and approximately 82% of total domestic RPKs
Japan’s domestic traffic plunged 5% as the devastating Typhoon Jebi took a big toll, including the multi-day closure of Kansai International Airport. The impact is likely to be short-lived, however.
Australia domestic traffic rose 0.9% in September, from a 1.7% rise in August. Demand has been tracking sideways in seasonally-adjusted terms over the past year or so.
The Bottom line
“Last month, IATA released its latest passenger forecast showing that demand for air travel could double to 8.2 billion passengers in 2037. Aviation already supports 65.5 million jobs and has an economic impact of $2.7 trillion. With growth comes the opportunity to make an even bigger contribution to global well-being. But governments need to start preparing by investing in adequate airport and airspace infrastructure to support rising demand for connectivity. The recent decision to cancel construction of the much-needed new airport for Mexico City is a backward step that will have negative economic ramifications not only for Mexico’s economy, but also for connectivity options across the Latin American region.
“Aviation is the business of freedom. It improves lives and livelihoods and makes the world a better place. But to grow the benefits of aviation, governments need to do their part, by providing sufficient airport and airspace capacity, at an affordable price, and at a quality aligned with our technical and commercial needs,” said de Juniac.