Global air cargo industry further troubled by variety of fear factors

The air cargo industry can’t seem to buy a break these days. 

Data for global air freight markets showing that demand, measured in cargo tons decreased by 3.3% in January 2020, compared to the same period in 2019.

According to The International Air Transport Association (IATA), January marked the tenth consecutive month of year-on-year declines in cargo volumes. Given the earlier U.S.-China trade friction this should hardly come as much of a surprise. Afterall, the air cargo industry started the year on a weak footing. However, with easing of those tariff tensions there was optimism that the sector would get a boost in 2020. 

Then came the COVID-19 outbreak, which has severely disrupted global supply chains, although it did not have a major impact on January’s cargo performance. 

“Tough times are ahead,” declares Alexandre de Juniac, IATA’s Director General and CEO. “The course of future events is unclear, but this is a sector that has proven its resilience time and again.”

Cargo capacity, measured in available cargo tons, rose by 0.9% year-on-year in January 2020. Capacity growth has now outstripped demand growth for 21 consecutive months.

IATA maintains that It is unlikely that the COVID-19 outbreak had very much to do with January’s weak performance. Lunar New Year in 2020 was earlier than in 2019. This skewed 2020 numbers towards weakness as many Chinese manufacturers would be closed for the holiday period. February performance will give a better picture of how COVID-19 is impacting global air cargo.

Meanwhile, airlines in Asia-Pacific and Europe suffered sharp declines in year-on-year growth in total air cargo volumes in January 2020, while North American and Middle East carriers experienced a more moderate decline. Latin America and Africa were the only regions to record growth in air freight demand compared to January 2019.  

Asia-Pacific airlines saw demand for air cargo contract by 5.9% in January 2020, compared to the year-earlier period. This was the sharpest drop in freight demand of any region for the month. Capacity growth was flat. Seasonally-adjusted cargo demand rose slightly however, following the thawing of U.S.-China trade relations. The impact from COVID-19 is expected to affect February’s performance. 

Preliminary traffic figures released recently by the Association of Asia Pacific Airlines (AAPA) showed that International air cargo volumes in January were soft, in part due to the closure of factories in Asia for the holiday season. 

Furthermore, international air cargo demand as measured in freight tons fell by 4.0% year-on-year in January, whereas offered freight capacity grew by 2.7%. As a result, the average international freight load factor declined by 3.7 percentage points to 53.0% for the month. 

Andrew Herdman, AAPA General also noted that the year started on a positive note, with further growth in demand for air travel recorded in January.”

“However, the renewed optimism was short-lived, as we are now in uncharted territory with the COVID-19 outbreak having had a very significant economic and social impact, leading to sharp falls in China-related traffic and wider effects on Asia Pacific travel and tourism markets, as well as severely disrupting global manufacturing supply chains, “ he said.

Finally, airlines have responded to the sharp falls in demand by reducing the number of flights operated across route networks while striving to maintain international connectivity. 

“From a business perspective, the impact of reduced demand is expected to lead to billions of dollars in lost revenue, mainly suffered by Chinese carriers and other Asia Pacific airlines,” said Herdman. “Airlines are therefore focusing closely on making associated cost reductions and conserving cash resources in order to survive the current downturn, whilst remaining ready to respond positively as and when the situation shows signs of improvement.”