Global air cargo markets recorded its smallest year-on-year demand contraction in June, according to released data from the International Air Transport Association (IATA), showing an improving air freight environment.

The trade association of the world's airlines noted that this is the lowest contraction in demand for the industry since February 2022.

For June, IATA reported that global demand — measured in cargo tonne-kilometres (CTKs) — fell 3.4% in June compared to June 2022 (-3.7% for international operations).

This is slightly better than the 5.2% year-on-year drop seen by the industry in May.

IATA noted that for the half year, demand slid 8.1% compared to the January-June period of 2022 (-8.7% for international operations). However, it noted that demand in June was only 2.4% below June 2019 levels (pre-pandemic).

The June decline recorded was also narrower than the 6.6% year-on-year drop recorded in April and also an improvement over March's 7.6% decline.

For June, capacity — as measured by available cargo tonne-kilometres (ACTKs) — rose 9.7% compared to June 2022, which was a slower rate compared to the double-digit growth recorded between March and May.

"This reflects strategic capacity adjustments airlines are making amid a weakened demand environment," the airline association said.

Capacity for the first half of 2023 was up 9.9% compared to a year ago — and is now 3.7% above June 2019 (pre-pandemic) levels.

IATA noted that key factors influencing air cargo demand include a 2.4% dip in global cross-border trade in May, reflecting the "cooling demand environment and challenging macroeconomic conditions."

Air cargo suffering more than container cargo

"The difference between the annual growth rates of air cargo and the global goods trade narrowed to -2.6 percentage points in May, representing the smallest gap since January 2022. However, the gap still suggests that air cargo continues to suffer more than container cargo from the slowdown in global trade," the trade association of the world's airlines added.

IATA also said both the manufacturing output Purchasing Managers Index (PMI (49.2) and new export orders PMI (47.1) were below the critical threshold represented by the 50 mark, indicating a decline in global manufacturing production and exports.

"We remain hopeful that the difficult trading conditions for air cargo will moderate as inflation eases in major economies. This, in turn, could encourage the central banks to loosen the money supply, which could stimulate greater economic activity," said Willie Walsh, director-general at IATA.

APAC, Africa record month-on-month decline

IATA reported that in June, Asia-Pacific airlines saw their air cargo volumes decrease by 3.6% year-on-year; and also a decline compared to May (-2.5%), mainly owing to weak demand on within-Asia markets, although the Asia-North America trade lane saw improved performance.

It added that available capacity in the region increased by 24.4% compared to June 2022. In the first half of the year, cargo demand was down 6.5% versus the year-ago period, with a 27.0% rise in capacity.

North American carriers had a 6.5% decrease in total cargo volumes in June compared to the same month in 2022, marking the fourth consecutive month in which the region had the weakest performance.

IATA said this was, however, an improvement compared to May (-8.6%). Europe-North America CTKs shrank by only 2.7% in June, following three months of double-digit contractions.

For the 2023 first half, cargo demand was down 10.5% compared to the 2022 first half, while capacity dipped 0.7%.

European carriers also saw a 2.8% decrease in cargo volumes in June 2023 — marking an improvement from a 6.6% decline in May, in part due to the aforementioned Europe-North America performance. IATA said cargo demand was down 10.2% for the first six months of 2023 compared to last year, as the half-year capacity rose 2.5%.

Middle Eastern carriers, meanwhile, posted a 0.5% increase in cargo volumes in June 2023 versus a year ago. IATA said this was a "strong turnaround" from the 2.9% year-over-year decline registered in May.

It noted that both Middle East-Asia and Middle East-Europe route areas saw annual growth. For the first half of the year, cargo demand was down 5.6% compared to a year ago, with an 11.2% hike in capacity.

Latin American carriers had the strongest performance in June, with a 7.3% year-on-year increase in cargo volumes, which is also an improvement compared to May's 3.8% increase. For the 2023 first half, cargo demand was up 0.9% versus a year ago, while capacity climbed 18.0%.

African airlines, meanwhile, posted a 2.8% decrease in demand compared to June 2022, which is also lower than the 1.9% drop seen in May.

IATA said for the first half of the year, cargo demand slowed by 4.4% while capacity climbed 1.6%.