IATA: Air Freight Demand Growth Slows in May - Passenger Moderating Demand Trend Continues

Air Cargo

The International Air Transport Association (IATA) released global air freight data showing that demand measured in freight tonne kilometers (FTKs) slowed in May with growth falling to 0.9% year-on-year. Yields remained pressured as freight capacity measured in available freight tonne kilometers (AFTKs) increased by 4.9% year-on-year. 

Freight demand decreased or flat lined in May across all regions with the exception of Europe and the Middle East. These regions recorded growth in air cargo volumes of 4.5% and 3.2%, respectively, in May, compared to the same period last year.

Broad weakness in world trade volumes, which have largely tracked sideways since the end of 2014, accounts for about 80% of air freight’s sluggish performance.

"Global trade has basically moved sideways since the end of 2014 taking air cargo with it. Hopes for a stronger 2016 are fading as economic and political uncertainty increases. Air cargo is vital to the global economy. But the business environment is extremely difficult and there are few signs of any immediate relief," said Tony Tyler, IATA’s Director General and CEO.

¹% of industry FTKs in 2015   ²Year-on-year change in load factor   ³Load factor level 

Regional Performance

Asia-Pacific airlines reported a 0.7% decrease in demand for air cargo in May compared to last year. Capacity expanded 3.7%. Airlines in Asia-Pacific continue to face headwinds from weak trade in the region and globally.

North American carriers experienced a decline in demand in year-on-year performance of 0.2%. Freight volumes have suffered from the strength of the US dollar which has kept the US export market under pressure. This has contributed to the freight demand of US carriers remaining in negative territory for the past twelve consecutive months. 

European airlines witnessed a 4.5% increase in freight volumes and a 5.7% increase in capacity in May 2016. The positive European performance corresponds with an increase in export orders in Germany over the last few months.

Middle Eastern carriers saw demand expand by 3.2% and capacity rise 9.5% in May 2016 compared to the same period last year. Despite carriers in the region reporting the fastest growth in aggregate, demand conditions have weakened considerably. Annual growth in May 2016 was one-fifth of the pace registered in May 2015. This reflects both an easing in network expansion by the region’s main carriers over the past six months and weak trading conditions. 

Latin American airlines reported a decline in demand of 9.7% and a decrease in capacity of 7%, as economic conditions continued to worsen in Latin America, particularly in the region’s largest economy, Brazil.

African carriers saw freight growth in May 2016 of 0.3% compared to the same period last year. African airlines’ capacity increased by 22.2% year-on-year on the back of long-haul expansion continuing the trend seen since December 2015.

View May freight results (pdf)

Passenger

The International Air Transport Association (IATA) announced global passenger traffic results for May showing that demand (measured in revenue passenger kilometers, or RPKs) rose 4.6%, compared to the same month in 2015, which was the same level achieved in April. Capacity climbed 5.5%, which pushed the average load factor down 0.7 percentage points to 78.7%. Demand for domestic traffic rose 5.1%, outpacing international demand growth of 4.3%.

"After a very strong start to the year, demand growth is slipping back toward more historic levels. A combination of factors are likely behind this more moderated pace of demand growth. These include continuing terrorist activity and the fragile state of the global economy. Neither bode well for travel demand. And the shocks of Istanbul and the economic fallout of the Brexit vote make it difficult to see an early uptick," said Tony Tyler, IATA’s Director General and CEO. 

   ¹% of industry RPKs in 2015   ²Year-on-year change in load factor   ³Load factor level   

International Passenger Markets

Annual growth in international RPKs slowed for the third consecutive month, to 4.3%, from 5% recorded in April year-over-year. Airlines in all regions recorded growth. Total capacity climbed 6.1%, causing load factor to slip 1.3 percentage points to 77.1%.

• Asia-Pacific airlines’ traffic rose 5.1% in May compared to the year-ago period. Capacity increased 6.4%, which caused load factor to slide 1.0 percentage point to 75.1%. Strong upward momentum has stalled in recent months with growth tracking sideways since the beginning of the year.
• European carriers’ May demand climbed just 2.1% over May 2015, reflecting continuing fallout from the Brussels terror attack. Capacity rose 3.5% and load factor dipped 1.1 percentage points to 80.6%, which despite the decline still was the highest among regions.
• Middle East carriers had an 11.8% rise in demand in May compared to a year ago, which was the largest increase among regions. Capacity increased 15.6%, however, and load factor dropped 2.4 percentage points to 71.9%. Growth in capacity has now exceeded traffic growth in 18 of the past 20 months.
• North American airlines’ traffic climbed 0.5% as carriers continue to focus on the larger and stronger domestic markets. Capacity rose 1.9% and load factor fell 1.1 percentage points to 80.1%.
• Latin American airlines experienced a 5.1% increase in traffic in May compared to the same month last year. As with Europe, upward momentum has stalled. Capacity climbed 5.2% and load factor was flat at 80.2%.
• African airlines’ traffic rose 9.5%, continuing the trend of strong growth that is linked to the expansion of long-haul networks by the region’s carriers, particularly Ethiopian Airlines. Capacity rose 10.4%, and load factor slipped 0.5 percentage points to 64.5%.

Domestic Passenger Markets
Domestic demand rose 5.1% in May compared to May 2015, which was up from the 4% year-on-year growth recorded in April. Results were decidedly mixed, with Brazil, Russia and Japan all showing declines. Domestic capacity climbed 4.4%, and load factor rose 0.5 percentage points to 81.7%.      

¹% of industry RPKs in 2015   ²Year-on-year change in load factor ³ Load 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   

• US domestic traffic climbed 4.4% in May. Having gone through a soft patch over the past six months in line with softening indicators of business confidence, demand appears to have resumed its upward trend.
• Brazil’s traffic continued to contract in May, falling 7.7% compared to a year ago amidst continuing political and economic turmoil. It is down more than 10% in seasonally-adjusted terms since early 2015.

The Bottom line
"The shockwaves of the Brexit vote have extended worldwide and the fallout will affect the air transport industry, from both economic and regulatory perspectives. Aviation plays a vital role in supporting economic growth and development. As the post-Brexit regulatory framework is negotiated between the EU and the UK it is critical that there are no steps backward for aviation connectivity," said Tyler.

View May passenger traffic results (pdf)