IATA: Freight Growth Slowdown Continues in June ; Passenger Demand Accelerates in June

The International Air Transport Association (IATA) released data for global air freight markets showing that demand, measured in freight tonne kilometers (FTKs), rose 2.7% in June 2018, compared to the same period the year before. This continues the slowdown in air cargo growth that began earlier in 2018. Growth for the first half of 2018 stands at 4.7%, less than half the growth rate in 2017.

Freight capacity, measured in available freight tonne kilometers (AFTKs), rose by 4.1% in June 2018. Capacity growth has now outstripped demand growth in every month since March.

There are three main factors driving the slowdown:

• The restocking cycle, during which businesses rapidly built up inventories to meet demand, ended in early 2018. There was a marked fall in air cargo volumes from March.
• We are now seeing a structural slowdown in global trading conditions as indicated by the fall in the Purchasing Managers Index (PMI) to its lowest level since 2016. Factory export order books have turned negative in China, Japan and the US.
• The temporary grounding of the Nippon Cargo Airlines fleet in the second half of June exaggerated the slow-down by shaving up to 0.5 percentage points off June growth.

"Air cargo continues to be a difficult business with downside risks mounting. We still expect about 4% growth over the course of the year. But the deterioration in world trade is a real concern. While air cargo is somewhat insulated from the current round of rising tariff barriers, an escalation of trade tension resulting in a ‘reshoring’ of production and consolidation of global supply chains would change the outlook significantly for the worse. Trade wars never produce winners. Governments must remember that prosperity comes from boosting their trade, not barricading economies," said Alexandre de Juniac, IATA’s Director General and CEO.      

¹% of industry FTKs in 2017   ²Year-on-year change in load factor   ³Load factor level              

Regional Performance    

All regions except Africa reported a year-on-year increase in freight volumes in June 2018, but the slow growth in Asia-Pacific, which accounts for nearly 37% of the entire air cargo market, dragged the global growth rate down.

• Asia-Pacific airlines saw freight demand increase by just 1.5% in June 2018 compared to the same period last year. Capacity increased by 5.2%. The international freight performance by the region fell to 1.1%, a 17-month low, although this partially reflects comparisons with the strong performance in June 2017. For the first six months of 2018 FTKs expanded by 4.6% year-on-year, and freight volumes are expected to settle at an annual 3-4% growth.
• European airlines posted a 3.3% increase in freight volumes in June 2018. Capacity increased by 5.4%. Growth is being affected by a slowdown in export orders. Supply chain bottlenecks, which are often alleviated by air freight, have also eased. For the first half of 2018, the region expanded 4.1% year-on year.
• North American airlines' freight volumes expanded 3.8% in June 2018 compared to the same period a year earlier. International FTK performance was 5.9%, making the region the strongest-performing market for the first time in two years. The strong dollar and robust growth in the US economy is driving inbound shipments. Capacity increased by 3.4%. Growth for the first half of 2018 was 5.3%, second only to exceptional growth in Latin America.
• Middle Eastern carriers' freight volumes grew 3.8% in June. This was an improvement on the May figure of 2.7% but this is well below the average five-year rate of 9.5%. Capacity increased 4.5%. Growth for first half of 2018 was 4.3% year-on-year, and the expectation is for volume growth to remain modest in the months to come.
• Latin American airlines experienced growth in demand of 5.9% in June 2018 – continuing its recent run of posting the largest increases of any region. Unusually, capacity decreased by 5.7%. The pick-up in demand for international freight (5.2%) slowed compared to last month, but continues to trend well above the five-year average (1.6%). Growth for the first six months of 2018 was 10.1%, comfortably the best performance of any region.
• African carriers saw freight demand contract 8.5% in June 2018 compared to the same month last year. Capacity also fell, by 1.4%. It is difficult to be positive about the current picture in Africa. International FTKs fell at the fastest pace (-8.6%) for nearly nine years. Although the year-on-year growth rate for the first half of 2018 was 3.0%, in seasonally-adjusted terms, FTKs are trending downward at an annualized rate of almost 20% over the past six months, and demand conditions are weak on all the main markets to and from the continent.

View June air freight results (pdf)

Passenger

The International Air Transport Association (IATA) announced global passenger traffic results for June showing that demand (measured in total revenue passenger kilometers or RPKs) rose by 7.8% compared to June 2017. This was up from 6.0% year-over-year growth recorded in both May and April. June capacity (available seat kilometers or ASKs) increased by 6.5%, and load factor rose 1.0 percentage point to 82.8%. The first six months of 2018 produced demand growth of 7.0%, a strong performance, but down from 8.3% growth recorded in the first half of 2017.

"The first half of 2018 concluded with another month of above-trend demand growth, which is a good indicator for the peak summer travel season in the northern hemisphere. But the looming prospect of a global trade war is casting a long shadow. Additionally, rising cost inputs—fuel prices have soared by approximately 60% over the past year—are reducing the stimulus of lower fares," said Alexandre de Juniac, IATA’s Director General and CEO.     

   ¹% of industry RPKs in 2017   ²Year-on-year change in load factor   ³Load factor level   

International Passenger Markets

June international passenger demand rose 7.7% compared to June 2017. All regions recorded growth, led by airlines in the Middle East and Africa. Capacity climbed 5.9%, and load factor increased 1.4 percentage points to 81.9%.

• Asia-Pacific airlines’ June traffic rose 9.5% compared to the year-ago period, up from 7.7% growth recorded in May year-over-year. Capacity rose 7.4% and load factor edged up 1.5 percentage points to 80.6%. Demand is being stimulated by robust regional economic growth and increased city-pair options for travelers.
• Middle Eastern carriers posted an 11.0% demand increase in June compared to the same month last year. This was a sharp turnaround from the flat traffic growth in May, which was partly attributable to the timing of Ramadan between the two years. Results were also affected by unfavorable developments in the year-ago period, including the ban on large portable electronic devices, as well as the travel restrictions imposed by the US for visitors from certain Middle East and African countries. Capacity rose 8.0% and load factor climbed 1.9 percentage points to 71.0%.
• European carriers saw traffic rise 6.1% in June compared to June 2017, down slightly from a 6.3% year-over-year increase recorded in May. Capacity climbed 4.8% and load factor rose 1.1% percentage points to 86.8%, highest among the regions. Growth is supported by a relatively healthy economic backdrop. However, the possibility of air traffic control strikes could affect growth over the coming months.
• North American airlines’ demand rose 5.9% compared to June a year ago, an improvement from 5.0% growth recorded in May. Capacity climbed 3.6%, with load factor increasing 1.9 percentage points to 86.7%. Increasing momentum in the US economy is supporting growth in passenger volumes, but prospects of further escalation in trade disputes could affect future demand.
• Latin American airlines experienced a 5.6% rise in traffic compared to the same month last year. This was down from 7.9% year-over-year growth in May and there are some possible indications of a slowing in demand growth. Capacity increased by 6.5% and load factor slipped 0.7 percentage point to 81.4%. Latin America was the only region to post a decline in load factor in June.
• African airlines’ traffic soared 10.9% in June, up substantially from just 2.1% growth in May, although this partly also reflect volatility in the monthly data. Capacity rose 5.5%, and load factor jumped 3.3 percentage points to 68.0%. Higher oil and commodity prices are buoying the economies in a number of countries, including Nigeria.

Domestic Passenger Markets             

Demand for domestic travel climbed 7.9% in June compared to June 2017, up somewhat from the 6.7% annual growth seen in May. June capacity increased 7.5%, and load factor edged up 0.3 percentage point to 84.5%. Led once again by double-digit gains in India and China, all markets reported demand increases, but with wide variation.

¹% of industry RPKs in 2017   ²Year-on-year change in load factor   ³Load factor level  *Note: the seven domestic passenger markets for which broken-down data are available account for 30% of global total RPKs and approximately 82% of total domestic RPKs                        

• Brazil’s domestic traffic rose 5.3% in June, up from 3.8% in May. Despite the improved performance, demand was still affected by the residual impact of the recent general strikes.
• Japan’s domestic traffic climbed 3.7% in June compared to a year ago, which was well up on the 1.7% growth recorded in May. However, there are some possible indications of a softening economic backdrop going forward.     

View June passenger traffic analysis