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September 2018 IATA Air Freight Market Analysis
Softer demand drivers, but cargo volumes are still trending higher

Highlights of the September 2018 Air Freight Market Analysis

  • Industry-wide freight tonne kilometres (FTK) grew by 2.0% year-on-year in September – well below the five-year average pace (5.1%) but consistent with the typical pattern seen after inventory-led upturns in the past.
  • Freight volumes are continuing to trend upwards at a solid rate by historical standards, helped by strong consumer confidence and robust global investment growth. Nonetheless, amid signs that manufacturing firms’ export order books are no longer growing, other demand drivers have softened over the course of the year.
  • The industry load factor fell in annual terms for the seventh month in a row, but yields look to be holding up still.

African FTK growth remains in negative territory
Year-on-year growth in international FTKs flown by African airlines remained in negative territory in September for the sixth time in seven months (-1.7%). Demand conditions remain weak on all the key markets to/from the continent.That said, while FTKs remain just over 6% below their November 2017 peak, they have recovered sharply in SA terms in recent months, and are still well above the levels seen in 2014-2016, for example.

Modest annual FTK growth in September

Industry-wide FTKs increased by 2.0% year-on-year in September and by the same pace in the third quarter as a whole. Such growth rates are well below the average pace seen over the past five years (5.1%). However, the key point is that the moderation in FTK growth over the past year or so is typical of the pattern seen historically following inventory restocking cycles. Recall that air freight volumes grew much faster than global goods trade in 2017 as firms turned to air freight from other modes of transport to restock inventory levels quickly. But amid signs that the inventory restocking cycle peaked in late-2017, the best of this boost to demand has long since passed.

It is important to note that freight volumes are continuing to trend upwards in seasonally adjusted (SA) terms; FTKs have risen at an annualized rate of 4.1% over the past six months, for example – a solid pace by historical standards. If this trend is sustained, the year-on-year growth rates will soon converge around this pace as the best of the upturn in 2017 drops out of the annual comparison. The current upward trend is continuing to be supported by a number of factors including strong levels of consumer confidence and investment, as well as fast growing areas such as e-commerce.

Manufacturers’ order books are no longer rising

That said, other demand drivers have continued to soften – particularly manufacturing firms’ export order books. The new export orders component of the global manufacturing Purchasing Managers’ Index (PMI) fell into contractionary territory in October for the first time since June 2016, reflecting a broad-based weakening across the world’s major exporting countries.
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