When you write a negative headline like “air freight demand weakens across the globe” those that skim read may miss the bigger picture. It is true that IATA stats show a reduction but not in all sectors. So what does it really mean.
The overall Air freight picture when seasonally adjusted shows that demand is 1.5% lower than last year. March saw an increase of 0.1% but this was not enough to counter the 4.9% contraction in February.
Where is cargo capacity beginning to bite
Where you see the biggest trend based on first quarter 2018 – 2019 figures is in the Asia – pacific market. No real surprise with the dominance of the Chinese economy in the region. A shrinking Chinese economy and trade tensions with the USA have an impact. These have clearly translated into reported volume figures.
March’s figures were clearly stronger than the 12% decline on growth in February. A 3.4% contraction on the Asia – Pacific market is hard for all other sectors to counter-balance. Africa / Europe / Latin America / Middle East and North America overall have posted growth figures. This has translated into increased capacity.
It’s only one region? good news for air freight
In simplistic terms the world air freight economy is doing well but the Asia Pacific economy has far reaching consequences. Take the Middle East for instance. All the major Middle Eastern airlines operate routes ex the Far East into the USA. Some have even laid on direct flights bypassing their country hub.
All increasing capacity at a time when we are seeing contraction on the trade lane. If the current trend continues then we may see a switch to routes where capacity is increasing. Freighter capacity in particular may move. Middle Eastern carriers show a downward trend over the last 6 months. This has been led by a double digit decline in the North American and Asian Pacific markets.
So where could air freight strengthen
Based on growth capacity projections where you are seeing some real traction is Europe, Africa and some Latin American countries. After a deep recession in Brasil the resurgence in air freight demand is strong. The country still has some major challenges to overcome. The region as a whole is a burgeoning economy. This may finally be coming good.
Europe, even with weakened German orders the region has had a solid start to the year. The merry go round which is “BREXIT” continues to cause some uncertainty which has had less of an impact than some may have anticipated.
Africa though is showing the strongest turnaround. A relatively small market in comparison to others helps when reporting higher percentage figures. It is hard though to ignore a 30% upward trend on the levels reported three years ago. A slight dip in 2018 figures has already been clawed back and airline expectations is for demand to continue into the region.
Could air freight recover to a positive in 2019
Overall the demand for air freight is likely to remain lower on a global scale in 2019 compared to 2018. For those who react to this and focus their efforts on those countries showing bullish results it could still be a good year. Airlines and freight forwarders need to be bold in re-focusing away from the Asia Pacific market if trade tensions continue to escalate.
With airlines working on stronger and stronger yield market sectors capacity reductions in some areas may clearly become necessary. Demand in other areas will need to continue their upward trend to combat this if overall capacity is to remain at the levels we are presently seeing.
If you would like to read more analysis on the market trends for March 2019 click here. This link takes you to IATA freight analaysis for air freight volumes in March. .