IATA: Air Air Freight Demand Continues Downward Trajectory in February 2019; Passenger Demand Moderates in February
- Geneva, Switzerland.
The International Air Transport Association (IATA) released data for global air freight markets showing that demand, measured in freight tonne kilometers (FTKs), decreased 4.7% in February 2019, compared to the same period in 2018. This was the fourth consecutive month of negative year-on-year growth and the worst performance in the last three years.
Freight capacity, measured in available freight tonne kilometers (AFTKs), rose by 2.7% year-on-year in February 2019. This was the twelfth month in a row that capacity growth outstripped demand growth.
Demand for air cargo continues to face significant headwinds:
Trade tensions weigh on the industry;
Global economic activity and consumer confidence have weakened;
And the Purchasing Managers Index (PMI) for manufacturing and export orders has indicated falling global export orders since September 2018.
“Cargo is in the doldrums with smaller volumes being shipped over the last four months than a year ago. And with order books weakening, consumer confidence deteriorating and trade tensions hanging over the industry, it is difficult to see an early turnaround. The industry is adapting to new markets for e-commerce and special cargo shipments. But the bigger challenge is trade is slowing. Governments need to realize the damage being done by protectionist measures. Nobody wins a trade war. We all do better when borders are open to people and to trade,” said Alexandre de Juniac, IATA’s Director General and CEO.
February 2019 (% year-on-year)
World share1
FTK
AFTK
FLF (%-pt)2
FLF (level)3
Total Market
100.0%
-4.7%
2.7%
-3.5%
44.7%
Africa
1.7%
-8.5%
6.8%
-6.1%
36.3%
Asia Pacific
35.5%
-11.6%
-3.7%
-4.2%
47.3%
Europe
23.3%
-1.0%
4.0%
-2.6%
53.0%
Latin America
2.6%
2.8%
14.1%
-3.3%
29.7%
Middle East
13.3%
-1.6%
3.1%
-2.2%
46.6%
North America
23.6%
-0.7%
7.1%
-3.0%
37.9%
1% of industry FTKs in 2018 2Year-on-year change in load factor 3Load factor level
Regional Performance
All regions reported a contraction in year-on-year demand growth in February 2019 except for Latin America.
Asia-Pacific airlines saw demand for air freight contract by 11.6% in February 2019, compared to the same period in 2018. Weaker manufacturing conditions for exporters in the region, ongoing trade tensions and a slowing of the Chinese economy impacted the market. Capacity decreased by 3.7%.
North American airlines saw demand contract by 0.7% in February 2019, compared to the same period a year earlier. This was the first month of negative year-on-year growth recorded since mid-2016, reflecting the sharp fall in trade with China. North American carriers have benefited from the strength of the US economy and consumer spending over the past year. Capacity increased by 7.1%.
European airlines experienced a contraction in freight demand of 1.0% in February 2019 compared to a year ago. The decline is consistent with weaker manufacturing conditions for exporters in Germany, one of Europe’s major economies. Trade tensions and uncertainty over Brexit also contributed to a weakening in demand. Capacity increased by 4.0% year-on-year.
Middle Eastern airlines’ freight volumes contracted 1.6% in February 2019 compared to the year-ago period. Capacity increased by 3.1%. A clear downward trend in seasonally-adjusted international air cargo demand is now evident with weakening trade to/from North America contributing to the decrease.
Latin American airlines posted the fastest growth of any region in February 2019 versus last year with demand up 2.8%. Despite the economic uncertainty in the region, a number of key markets are performing strongly. Seasonally-adjusted international freight demand achieved growth for the first time in six months. Capacity increased by 14.1%.
African carriers saw freight demand decrease by 8.5% in February 2019, compared to the same month in 2018. Seasonally-adjusted international freight volumes are lower than their peak in mid-2017; despite this, they are still 25% higher than their most recent trough in late-2015. Capacity grew 6.8% year-on-year.
The International Air Transport Association (IATA) announced global passenger traffic results for February 2019 showing total revenue passenger kilometers (RPKs) rose 5.3%, compared to February 2018. This was the slowest rate of growth in more than a year but still in line with long-term demand trends. Monthly capacity (available seat kilometers or ASKs) increased by 5.4%, and load factor slipped 0.1 percentage point to 80.6%, which is still high by historic standards.
“After January’s strong performance, we settled down a bit in February, in line with concerns about the broader economic outlook. Continuing trade tensions between the US and China, and unresolved uncertainty over Brexit are also weighing on the outlook for travel,” said Alexandre de Juniac, IATA’s Director General and CEO.
February 2019 (% year-on-year)
World share1
RPK
ASK
PLF (%-pt)2
PLF (level)3
Total Market
100.0%
5.3%
5.4%
-0.1%
80.6%
Africa
2.1%
2.8%
1.1%
1.1%
70.4%
Asia Pacific
34.5%
6.3%
5.8%
0.4%
82.6%
Europe
26.7%
7.3%
7.7%
-0.3%
81.5%
Latin America
5.1%
5.0%
5.5%
-0.4%
81.3%
Middle East
9.2%
-0.9%
2.7%
-2.6%
72.6%
North America
22.4%
4.2%
3.9%
0.3%
80.8%
1% of industry RPKs in 2018 2Year-on-year change in load factor 3Load factor level
International Passenger Markets
February international passenger demand rose 4.6% compared to February 2018, which was a slowdown from 5.9% growth in January. Capacity climbed 5.1%, and load factor dropped 0.4 percentage point to 79.5%. Airlines in all regions but the Middle East showed traffic growth versus the year-ago period.
European carriers showed the strongest performance for a fifth consecutive month in February. Passenger demand increased by 7.6%, compared to a year ago, unchanged from January. Europe’s continuing strong performance provides a paradox given Brexit concerns and signs of a softer economic outlook. Capacity rose 8.0% and load factor slid 0.3 percentage point to 82.3%, which still was the highest among regions.
Asia-Pacific airlines’ February traffic rose 4.2% compared to the year-ago period, a substantial slowdown from the 7.2% increase recorded in January. The timing of the Lunar New Year holiday in the first week of February this year may have shifted some traffic to January. Capacity increased 4.7% and load factor dipped 0.3 percentage point to 81.0%.
Middle East carriers recorded a 0.8% traffic decline in February compared to a year ago, the only region to report a drop year-over-year. Capacity rose 2.9% and load factor fell 2.7 percentage points to 72.6%. Broadly speaking, passenger volumes of the region’s airlines have been moving sideways for the past 12 - 15 months.
North American airlines’ traffic climbed 4.2% in February, a decline from 5.4% growth in January. Capacity rose 2.9% and load factor was up 1.0 percentage point to 79.0%. Signs of softening economic activity at the end of 2018, in conjunction with the effects of ongoing tensions between the US and several of its trading partners, may be mitigated by the region’s low unemployment and generally sound economic backdrop.
Latin American airlines saw traffic rise 4.3% compared to February 2018, a slippage from 5.4% annual growth in January. Capacity increased by 5.6%, and load factor dropped 1.0 percentage point to 81.4%. Renewed economic and political uncertainties in a number of key countries may weigh upon air transport demand in coming months.
African airlines experienced a 2.5% rise in traffic for the month compared to the year-ago period, down from 5.1% growth in January. Concerns over conditions in the largest economies are contributing to the slowdown. Capacity rose 0.3%, and load factor climbed 1.5 percentage points to 69.7%.
Domestic Passenger Markets
Domestic travel demand rose 6.4% in February compared to February 2018, down from 7.4% annual growth in January. All markets except Australia reported increases in traffic, with India recording its 54th consecutive month of double-digit percentage growth. Domestic capacity climbed 5.8%, and load factor edged up 0.5 percentage point to 82.4%.
February 2019 (% year-on-year)
World share1
RPK
ASK
PLF (%-pt)2
PLF (level)3
Domestic
36.1%
6.4%
5.8%
0.5%
82.4%
Australia
0.9%
-1.7%
-1.6%
-0.1%
78.0%
Brazil
1.1%
5.8%
3.1%
2.1%
82.5%
China P.R
9.5%
11.4%
8.9%
1.9%
86.9%
India
1.6%
10.0%
12.3%
-1.9%
89.1%
Japan
1.0%
2.5%
2.9%
-0.2%
70.9%
Russian Fed.
1.4%
10.1%
11.8%
-1.1%
76.9%
US
14.1%
4.5%
4.8%
-0.2%
81.7%
1% of industry RPKs in 2018 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
China topped the growth chart for a second month in a row, with RPKs up a strong 11.4% year-on-year, although this was down from 14.5% growth in January compared to a year ago.
Brazil’s domestic traffic increased 5.8% in February, compared to a year ago, the fastest pace in more than six months and more than double the 2.6% year-over-year rise for January. Brazil was the only domestic market tracked by IATA to show an increase in the year-on-year growth rate compared to January 2019.
The Bottom Line
“While overall economic confidence appears to be softening, aviation continues to deliver solid results, helping to sustain global commerce and the movement of people. The Brexit deadline has come and gone with no separation agreement, but with vital air connectivity between the UK and the Continent maintained for the present. Temporary measures, however, are no substitute for a comprehensive Brexit package that will ensure that the Business of Freedom is able to play its vital role in contributing to the well-being of the region—and the world,” said de Juniac.
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