Air freight grows slower than capacity

The International Air Transport Association (IATA) reported a significant slowdown in growth of air freight in 2018. After 2017’s explosive 9.7% growth in Freight Tonne Kilometres (FTKs), 2018 saw a still strong but modest 3.5%.

Air freight capacity however grew by 5.8% in 2018, significantly outpacing demand according to IATA.

December saw a softening in global air freight demand. Compared to the year before, December saw a 0.5% decrease in demand – the worst performance since 2016. Freight capacity that month however grew by 3.8%, marking the tenth month in which capacity outgrew demand.

International e-commerce grew in 2018 which was a positive factor for the year. Yet, there was a softening of several key demand drivers:

– The restocking cycle, during which businesses rapidly built up inventories to meet demand, ended in early 2018;
– Global economic activity weakened;
– The export order books of all major exporting nations, with the exception of the US, contracted in the second half of 2018;
– Consumer confidence weakened compared to very high levels at the beginning of 2018.

“Air freight demand lost momentum towards the end of 2018 in the face of weakening global trade, sagging consumer confidence and geopolitical headwinds. Still, demand grew by 3.5% compared to 2017. We are cautiously optimistic that demand will grow in the region of 3.7% in 2019. But with the persistence of trade tensions and protectionist actions by some governments there is significant downside risk. Keeping borders open to people and to trade is critical,” said Alexandre de Juniac, IATA’s Director General and CEO.

“To attract demand in new market segments, the air cargo industry must improve its value proposition. Enabling modern processes with digitalization will help build a stronger foothold in e-commerce and the transport of time- and temperature-sensitive goods such as pharmaceuticals and perishables,” said de Juniac.