September 2018 | News | Global Logistics

Global Air Freight in Slow Motion

Tags: Air Cargo, Logistics, Supply Chain

Demand for global air freight, measured in freight tonne kilometers (FTKs), rose 2.1 percent in July 2018, compared to the same period the year before, according to the International Air Transport Association (IATA). This was the slowest pace of growth since May 2016, and well below the five-year average growth rate of 5.1 percent.

Freight capacity, measured in available freight tonne kilometers (AFTKs), grew by 3.8 percent year-on-year in July 2018, the fourth time in five months that capacity growth outstripped demand growth.

While the temporary grounding of the Nippon Cargo Airlines fleet may have exaggerated a slowdown in growth at the beginning of July, IATA points to three indications that slower growth will continue:

  1. The inventory re-stocking cycle, which requires quick delivery to meet customer needs, ended at the beginning of the year.
  2. There has been a broad-based weakening in manufacturing firms' export order books. Specifically, export order books in Europe started weakening in February and have fallen in China and Japan in recent months.
  3. Manufacturers in Asia and Europe, the top two global trading areas by volume, report longer supplier delivery times. This typically means they have less need for the speed air freight affords.

"July demand for air cargo grew at its slowest pace since 2016," says Alexandre de Juniac, IATA's director general and CEO. "We still expect 4-percent growth over the course of the year, however the downside risk has increased.

"The tariff war and increasingly volatile trade talks between the world's two largest trading nations—China and the United States—are rippling across the global economy, putting a drag on both business and investor sentiment," he adds. "Trade wars only produce losers."