Aviation
STRONG END TO 2016 BUOYS IATA FORECAST
January 3, 2017

Strong end-of-year figures could well support air cargo into next year, although some counter factors will likely see lower growth, statistics released by IATA show.

 

Figures from the world’s air transport body show demand when measured in freight tonne kilometres (FTKs) rose 8.2% year-on-year in October. Freight capacity in available freight tonne kilometres (AFTKs) grew 3.6% in the same period.

 

“We welcome that,” Alexandre de Juniac, IATA’s director general and CEO said of the increase in growth – although given the problems the sector has with overcapacity, it might also apply there.

 

Asia has made a big contribution to the increases with both regional and intra-regional volumes rising – sometimes almost by heart-stopping margins.

 

Regional demand increased 7.8% against a 3.9% increase in capacity, IATA statistics say. Better still were international freight volumes, which expanded 8.0% in October and which fueled an annualized increase, in seasonally adjusted terms, of 15% since March 2016.

 

All of which is giving the industry an optimistic outlook as well as some year-end cheer.

 

“Global air freight markets look set to end 2016 on a high note,” de Juniac added. “Demand is growing at its fastest pace in 18 months. It remains to be seen how long this growth trend will endure after the year-end peak period and we still face headwinds from weak global trade. But there are some encouraging signs.”

 

What is interesting and underlines the significance of these results is that air cargo started the year with a weak first quarter, which recovered and grew in the second, continued to grow in the third quarter, and is already shaping up for a strong fourth quarter.

 

A number of factors have helped produce the good results so far this year, with the top being the resilience of the world economy, something IATA analysts believe will be maintained going forward. “We are expecting to see more growth in the advanced economies,” George Anjaparidze, IATA senior economist told a year-end press briefing.

 

A key part of this is the support it gives to future consumer confidence. However, there are also significant changes on the demand side that need to be considered.

 

Two years ago, consumers in the EU and the US lagged behind their Chinese counterparts by a telling amount, Anjaparidze said, referring to information from Datastream. Now, it is much more even, with China and the US level-pegging.

 

Europe is an interesting mix both of individual markets and of comparisons.

 

“When we look within the Eurozone, a number of countries have shown stronger growth momentum in the first half of 2016 compared to first half of 2015. [The growth of] Spain, Italy and France represents sustained expansion. Just two years ago these countries were stagnating or in outright recession,” Anjaparidze told Asia Cargo News. “The positive growth momentum in these economies has had a favourable impact on air cargo demand to and from Europe.”

 

A number of specific factors, besides general economic health, support consumers not just in Europe but throughout the world, he pointed out.

 

One is lower fuel prices, which allows for more disposable income. Another is buoyant housing prices, which means “consumers have felt richer,” Anjaparidze said. This showed throughout the year with consumer spending “strong,” as IATA put it, during the second half.

 

Good though all this is, there are some things that still need to watched. One is the issue of how this affected yields. To some extent, the jury is still out on this, as it was reported there is a significant decrease in yields. “Yields have fallen significantly since oil prices started to fall,” although some airlines “may have started to dip into profitability,” said Anjaparidze.

 

While this well might delay and complicate the consolidation the air cargo sector probably needs, it also means overcapacity looks set to remain a problem the industry will face in the coming year.

 

“We expect a moderate acceleration in the global economy in 2017 as fiscal policies ease a little,” Anjaparidze said. “But there is much uncertainty about the outlook as price stimulus from lower oil prices is moving into reverse, the impact on growth of Brexit and the economic policies of the new US president are not yet clear, while world trade remains much weaker than before the global financial crisis.”

 

Despite these concerns, the general outlook for the coming years is basically upbeat. Growth demand will persist, said Anjaparidze, adding 2017 will be “another good year.” However, tempering a number of factors, the optimism, he said, this would be “moderate rather than a spike.”

 

 

By Michael Mackey

Correspondent | Geneva