IATA hopeful on cargo yields as demand continues to soar

04 / 10 / 2017

IATA is hopeful that cargo yields could be set to improve as demand growth outstrips capacity supply.

In its latest market wrap up, the airline association said that air cargo demand in freight tonne km terms increased by 12.1% in August, well ahead of the five-year average growth rate of 4.4% and the year-to-date rate of 10.5%.

Meanwhile, freight capacity increased by the lower amount of 4.7%, helping cargo load factors for the month reach 43.3%.

IATA said that the pace of capacity growth had slowed, which should be good news for yields.

"Air cargo had another stellar performance in August,” said Alexandre de Juniac, IATA director general and chief executive.

“Demand for air cargo grew at a double-digit rate for the fourth month in a row — outperforming demand for passenger travel for the fourth consecutive month.

“Rapid growth in cargo demand means that cargo capacity is now growing in response to real cargo demand rather than automatically as carriers responded to passenger demand.

“The pace of capacity growth, however, has slowed even as freighter fleets are being utilised more intensely. Overall, that should be good news for much beleaguered cargo yields.”

The airline association also reiterated past warnings that the cyclical growth peak may be close as the global inventory-to-sales ratio in the US, for example, has stopped falling, usually meaning that re-stocking to meet demand is ending.

For the full year, IATA has forecast demand growth of 7.5%, although it added there is significant upside potential.

Looking at performance on a regional basis, Asia-Pacific airlines’ freight volumes grew 11.3% in August on a year ago, while capacity was up 5.7%.

“Demand growth was strong on all the major routes to, from and within Asia-Pacific, consistent with strong export order books for the region’s manufacturers,” IATA said.

North American carriers posted an increase in freight volumes of 11.7% and a capacity increase of 3.7%.

IATA explained that the strength of the US dollar has boosted the inbound freight market over the past few years.

“Despite the US dollar remaining strong by historical standards, its slight decline since the start of the year is expected to start to help rebalance trade flows,” the organisation added.

At European airlines there was an 11.8% increase in freight demand in August. Concerns that the recent strengthening of the euro may have affected the regions’ exporters have not materialised, IATA said, adding: “In fact German manufacturers’ export orders are growing at their fastest pace since early-2010.”

At Middle Eastern carriers, year-on-year freight volumes increased 14.1% in August and capacity increased 2.8%, with the strong pick-up in demand reflecting favorable comparisons to a short-lived weak patch in demand in 2016.

The region’s carriers are facing tough competition from airlines from other areas of the world, particularly on the Asia-Europe route.

Latin American airlines experienced a growth in demand of 8.5% in August – close to a seven-year high – and capacity increased by 9.3% compared to the same period in 2016

The pick-up in demand reflects signs of economic recovery in the region’s largest economy, Brazil.

Finally, African carriers posted the largest year-on-year increase in demand of all regions in August 2017 with freight volumes growing 29.4%.

“Demand has been boosted by very strong growth on the trade lanes to and from Asia which increased by more than 67% in the first half of the year,” IATA said.

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