Middle East carriers' freight volumes grew the fastest of any region in July with an increase in demand of 5.4 per cent compared to the same period a year earlier, according to recent data.

According to figures released by the International Air Transport Association (Iata), capacity increased 6.3 per cent in the Middle East. Seasonally-adjusted freight volumes continue to trend upwards, however, at a comparatively modest pace by the region’s standards.

Iata data for global air freight markets showed that demand, measured in freight tonne kilometers (FTKs), rose 2.1 per cent in July 2018, compared to the same period the year before. This was the slowest pace of growth seen since May 2016 and well below the five-year average growth rate of 5.1 per cent.

Freight capacity, measured in available freight tonne kilometers (AFTKs), grew by 3.8 per cent year-on-year in July. This was 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, there are three indications that slower growth will continue:

•The inventory re-stocking cycle, which requires quick delivery to meet customer needs, ended at the beginning of the year.
•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.
•Longer supplier delivery times are being reported by manufacturers in Asia and Europe, the top two global trading areas by volume. This typically means that they have less need for the speed afforded by air freight.

Alexandre de Juniac, director general and chief executive officer, Iata, said: “July demand for air cargo grew at its slowest pace since 2016. We still expect 4 per cent 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 US - are rippling across the global economy putting a drag on both business and investor sentiment. Trade wars only produce losers,” he added.

All regions reported year-on-year demand growth in July 2018, except Africa which contracted. All regions, except Africa and Latin America, reported that capacity growth exceeded growth in demand, said the report.

Asia-Pacific airlines saw demand for freight lose momentum in July 2018. Growth slowed to 0.9 per cent compared to the same period last year. Capacity increased by 3.9 per cent. As the largest freight-flying region, carrying one-third of the total, the risks from protectionist measures impacting the region are disproportionately high.

North American airlines’ freight volumes expanded 2.6 per cent in July 2018 compared to the same period a year earlier. Capacity increased by 4.0 per cent. The recent momentum of the US economy and the US dollar has helped strengthen demand for air imports. A sharp pick-up in supply chain bottlenecks, which is typically alleviated by the speed of air freight, may also be benefiting the demand.  

European airlines posted a 2.6 per cent increase in freight volumes in July 2018. This is a significant slowdown from the five-year average annual growth rate of 5.6%. Despite this and the weakening of manufacturers’ order books, seasonally-adjusted air freight volumes have resumed their upward trend in recent months. Capacity increased 4.4 per cent.

Latin American airlines experienced a slowdown in freight demand growth in July 2018 to 3.0 per cent. This was only a quarter of the growth rate seen in June 2018 (11.4 per cent) but still above the five-year average pace of 2.1 per cent. Capacity decreased 7.8 per cent.  

African carriers saw freight demand contract by 8.3 per cent in July, compared to the same month last year. This was the fourth time in five months that demand contracted. Capacity decreased by 0.7 per cent. After a surge in international FTK volumes last year, seasonally-adjusted international freight volumes have now trended downwards at an annualised pace of 18 per cent over the past six months. This reflects a softening in demand on markets to/from Asia and the Middle East, it stated. – TradeArabia News Service