Air freight in cautious recovery
The IATA reports that growth in air freight markets moderated in February, rising 2.9% compared to a year ago, down on the 4.3% increase in January. But combining the first two months of the year shows there has been a solid 3.6% gain in 2014 compared to the year ago period – well above the growth in 2013 overall (1.4%).
The growth trend in air freight volumes showed a 2.8% slip in February compared to January. While this could be interpreted as a reversal in the recent acceleration of the growth trend, fundamental drivers of air freight remain broadly positive, which suggests the contraction in February is likely due to temporary factors leading to volatility in volumes.
The IATA freight model shows that recent increases in world trade growth contributed about 2.0% pts to the 2.9% year-on-year rise in FTK in February. The model also indicates that a slight rise in inventory-to-sales ratios had about a 1.2% point dampening effect on the February year-on-year growth rate. The rise in inventories, however, is likely reflecting improvements in business conditions which point to stronger output and sales ahead.
Regional performance was mixed in February. Middle Eastern airlines continue to record the strongest increases, up 11.9%, with regional carriers continuing to expand capacity and network reach. European carriers have experienced steady increases in air freight demand since mid-2013, consistent with the region’s emergence from recession, and have continued on this path with a 5.5% rise in FTK in February. By contrast, Asia Pacific carriers, which have seen improvement in air freight demand over recent months due to acceleration in regional trade growth, recorded almost no change in FTK volumes in February (0.1%) compared to a year ago.
Load factors slipped slightly in February compared to January, as the fall in volumes exceeded the contraction in capacity. Nonetheless, air freight load factors are currently in line with levels a year ago, with only Asia Pacific and Africa seeing a fall, in both cases as a result of weak demand.
The outlook for air freight remains broadly positive, consistent with the cyclical pick-up in global economic growth. But current growth in trade is slower than expected at this point in the economic cycle, largely due to on-shoring trends which have equalized the relationship between world trade and domestic production growth. Moreover, while the US and Europe gain economic momentum, China is entering a steeper downturn. These factors will likely keep future growth in air freight demand contained, but still stronger than performance in 2013.