Air freight volumes hit by trade war flare-up

Air freight market demand contracted by 3.2 per cent in July, the ninth straight month of year-on-year decline in volumes.

Freight volumes handled by Middle Eastern airlines dropped by 5.5 per cent in July 2019 compared to the year-ago period as across the globe air cargo continued to suffer from weak global trade and the intensifying trade dispute between the US and China, the International Air Transport Association (Iata) said.
Iata data for global air freight markets shows that demand, measured in freight tonne kilometers (FTKs), contracted by 3.2 per cent in July 2019, compared to the same period in 2018. This marks the ninth consecutive month of year-on-year decline in freight volumes.
For Middle East airlines, the freight volume drop was the sharpest of any region. "Capacity increased by 0.2 per cent. Escalating trade tensions, the slowing in global trade and airline restructuring have impacted the recent performance," Iata said.
The fall in freight volumes came as global trade volumes dropped 1.4 per cent year-on-year as volumes between the US and China have fallen by 14 per cent year-to-date compared to the same period in 2018, Iata said. The global Purchasing Managers Index does not indicate an uptick. Its tracking of new manufacturing export orders has pointed to falling orders since September 2018. And for the first time since February 2009 all major trading nations reported falling orders.
Freight capacity, measured in available freight tonne kilometers (AFTKs), rose by 2.6 per cent year-on-year in July 2019. Capacity growth has now outstripped demand growth for the ninth consecutive month.
Alexandre de Juniac, Iata's director-general and CEO, said trade tensions are weighing heavily on the entire air cargo industry.
"Higher tariffs are disrupting not only transpacific supply chains but also worldwide trade lanes. While current tensions might yield short-term political gains, they could lead to long-term negative changes for consumers and the global economy. Trade generates prosperity. It is critical that the US and China work quickly to resolve their differences," said de Juniac.
The airline industry body has warned that the effects of the US-China trade war and high fuel prices would wipe $7.5 billion off expected airline profits during 2019. Carriers worldwide will collectively generate a profit of $28 billion, down a fifth on estimates made at the end of last year, $2 billion less than 2018, according to Iata.
Airlines in Asia-Pacific and the Middle East suffered sharp declines in year-on-year growth in total air freight volumes in July, while North America and Europe experienced more moderate declines. Africa and Latin America both recorded growth in air freight demand compared to July last year.
The Dow Jones Transportation Average, which tracks 20 companies in package delivery trucking, rail and airline segments is up 10 per cent this year, compared with nearly 17 per cent gain for the broader S&P 500. The DJTA, considered an economic bellwether, has dropped by about 5 per cent in July, compared with an almost 2 per cent decline in the broader market. 
In July, the Cass Freight Index, which measures North American rail and truck volumes, fell 0.8 per cent from June, marking its eighth month of declines, and a drop of nearly 6 per cent from a year ago.
- issacjohn@khaleejtimes.com

Issac John

issacjohn@khaleejtimes.com