IATA: 2016 shaping up to be a tough year for air cargo

IATA has warned 2016 is shaping up to be another tough year for air cargo as airfreight volumes fell in March.
The latest statistics from the industry organisation show that cargo volumes decline by 2% year on year in March in freight tonne km (FTK) terms.
Freight capacity (AFTK) during the month rose by 6.9% on last year, which resulted in load factors (FLF) declining to 43.5% compared with 47.9% a year earlier.
The weaker load factor levels reflect air cargo rates. Drewry’s latest figures show that average prices stood at $2.58 per kg in March compared with $2.90 per kg during the same month a year ago.

IATA said the weak results reflected subdued growth in world trade, exaggerated by the comparison to a particularly strong start to 2015 when airfreight volumes were boosted by the effects of the US west coast seaports strike.
This is reflected by the fact that the most significant fall in demand was reported by carriers in Asia-Pacific and North America.  Combined they account for around 60% of global freight traffic and reported declines of 5.2%, and 1.8%, respectively.
The distorting effects of the seaport strike last year are expected to ease over the coming months as the industrial action ended in late February, although cargo backlogs did take some time to clear.
“Nonetheless, the underlying backdrop for airfreight remains weak,” IATA said.
IATA’s director general and chief executive Tony Tyler said: “It is shaping up to be another tough year for air cargo.
“February 2016 world trade volumes were only 0.4% higher than at the end of 2014 and the expectations of purchasing managers gives little optimism for an early uptick.
“The combination of fierce competition, capacity increases and stagnant demand makes this a very difficult environment in which to generate profits.”
The export orders component of the global Purchasing Managers’ Index −
a closely watched business survey, which has a long-standing relationship with growth in airfreight volumes – remained in contractionary territory for the second consecutive month in March.
Looking at the regional results, African airlines witnessed a 3.1% drop in demand in March 2016 compared to the same period last year. A decline of 1.6% was seen in year-on-year first quarter performance.
On the back of long-haul expansion, African airline capacity surged by 22.6% year-on-year over the first quarter of 2016. This is more than double the pace of any other region in recent months.
Asia-Pacific carriers saw a 5.2% drop in demand in March 2016 compared to the same month last year. The decline is exaggerated by the effects of last year’s US seaport disruption.
“Nonetheless, demand is weak with export volumes from emerging Asian economies having contracted in annual terms for 11 of the past 12 months,” IATA said.
European airlines saw demand for air cargo grow by 1.3% in March 2016, compared to the same period in 2015, while capacity increased by 7.9%.
Latin American carriers saw demand decrease by 5.9% in March 2016 versus March 2015. Volumes are now almost 15% lower that their seasonally-adjusted peak in late-2014.
IATA said: “The hardest hit routes are those within South America, reflecting the region’s challenging economic environment, particularly in Brazil.”
Middle Eastern carriers reported a 2.4% increase in demand over March last year—the slowest since July 2009. This reflects both a slowdown in network expansion by the region’s main carriers over the past six months and weak trading conditions. 
Finally, North American airlines saw demand fall by 1.8% in March 2016 versus March 2015, partially due to the rollover effect of the US port strike.
“Additionally, the region’s carriers are negatively impacted by the drop in global trade while the strong US dollar is keeping exports under pressure.”

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