Global airfreight demand contracted further in August, marking the 10th consecutive month of declines and the longest period of declines since the global financial crisis in 2008.
Continuous airfreight drop "deeply concerning"
The International Air Transport Association (IATA) released data for global air freight markets showing that demand, measured in freight tonne-kilometres (FTKs), dropped by 3.9% in August 2019, compared to the same period in 2018, prompting Alexandre de Juniac, IATA director general and CEO to describe the situation as "deeply concerning."
Freight capacity, measured in available freight tonne kilometres (AFTKs), rose by 2% year-on-year in August 2019.
IATA said capacity growth has now outstripped demand growth for the 16th consecutive month.
"Air cargo continues to face strong headwinds from the intensifying trade war between the US and China, as well as weakness in some of the key economic indicators and rising political uncertainties worldwide," IATA said in a statement adding that "global trade volumes are 1% lower than a year ago."
Apart from the trade tensions, the economy of emerging markets were also subdued in the past few months.
"Trade in emerging countries has been underperforming that of advanced nations throughout most of 2019. This is due to higher sensitivity of the emerging economies to trade tensions, rising political instability and sharp currency depreciation in some of the key emerging market," IATA said.
It noted that global export orders continue to fall with new manufacturing export orders pointing to falling orders since September 2018. And for the second month in a row, IATA said all major trading nations reported falling orders.
“The impact of the US-China trade war on air freight volumes was the clearest yet in August. Year-on-year demand fell by 3.9%. Not since the global financial crisis in 2008 has demand fallen for 10 consecutive months. This is deeply concerning. And with no signs of a détente on trade, we can expect the tough business environment for air cargo to continue. Trade generates prosperity. Trade wars don’t. That’s something governments should not forget,” Juniac was quoted as saying.
Asia Pacific, Middle East Airlines were hardest hit
Airlines in Asia-Pacific and the Middle East suffered sharp declines in year-on-year growth in total air freight volumes in August 2019, while North America and Europe experienced more moderate declines.
Only Africa and Latin America both recorded growth in air freight demand compared to August last year.
Middle Eastern airlines saw freight volumes decrease 6.7% in August, the sharpest drop in freight demand of any region. IATA said this was triggered by escalating trade tensions, the slowing in global trade, airline restructuring and economic uncertainty from oil price volatility.
North American airlines saw demand decrease by 2.4% as capacity increased by 1.3%. Aside from the trade war, falling business confidence continues to weigh on the region’s carriers, according to IATA which also said that specifically, freight demand has contracted for the largest routes between Asia and North America, where seasonally-adjusted volumes are down almost 5%.
Disruption at HK airport contributed to further declines
IATA's report showed that Asia Pacific airlines saw demand for air freight contract by 5% in August 2019 year-on-year with the US-China trade war along with the slowdown in the Chinese economy have significantly impacted this region.
The temporary shutdown of Hong Kong International Airport – the largest cargo hub in the world – added additional pressure.
"With the region accounting for more than 35% of total FTKs, this performance is the major contributor to the weak industry-wide outcome," IATA said.
European airlines posted a 3.3% decrease in freight demand driven by weaker manufacturing conditions for exporters in Germany, softer regional economies, and ongoing uncertainty over Brexit.
Latin American airlines, on the other hand, saw an increase in freight demand in August of 0.1% while capacity decreased 2.9%. African carriers posted the fastest growth of any region in August 2019, with an increase in demand of 8% compared to the same period a year earlier, as capacity grew 17.1% year-on-year.
"This makes Africa the strongest performer for the sixth consecutive month ... strong trade and investment linkages with Asia have underpinned a double-digit increase in air freight volumes between the two regions over the past year," IATA said, also noting that China recently confirmed a further US$60 billion investment into the continent.
