This article first appeared in The Edge Financial Daily on May 30, 2019

KUALA LUMPUR: Global air cargo growth for 2019 is set to be revised lower after data yesterday showed that demand fell 4.7% year-on-year (y-o-y) in April, according to the International Air Transport Association (IATA).

“This continued the negative trend in y-o-y demand that began in January,” the grouping of 290 airlines, which comprises 82% of global air traffic, said. Air cargo volume fell 1.8% and 4.7% in January and February, respectively, but picked up slightly by 0.1% in March.

Chief economist Brian Pearce said the airline grouping is set to revise down its 2019 air freight forecast at the coming IATA annual general meeting (AGM) this weekend, after April’s air freight figures. In December last year, IATA projected 2019 freight volume to grow by 3.7% to 65.9 million tonnes.

Pearce added that trade tensions between the US and China have contributed to declining air cargo volume.

“Since end-2018, we are clearly seeing quite a deterioration in cross-border trade following the earlier round of tariff increases. If we continue to see further deterioration [in cross-border trade] as a result of the US raising tariffs to 25% from 10% [on goods from China], there will be some further damage to world trade. Clearly, it will be a difficult year for the global air cargo market,” he said in a media teleconference yesterday ahead of IATA’s AGM.

“The continued weakness is likely to lead to further subdued annual air freight growth in the coming months,” he added.

April’s air cargo volume drop was on the back of a 2.6% y-o-y increase in freight capacity.

“Capacity growth has now outpaced that of demand for the last 12 months. Air cargo volumes have been volatile in 2019 due to the timing of Chinese New Year and Easter, but the trend is clearly downwards, with volumes around 3% below the August 2018 peak,” said IATA director-general Alexandre de Juniac in a separate statement yesterday.

During the teleconference, de Juniac noted that Asia-Pacific, which accounts for a 35.4% share of the global air freight market, saw the biggest drop in volume of 7.4% y-o-y in April, followed by Europe and the Middle East, which both saw a 6.2% decline.

Nevertheless, de Juniac said global passenger traffic results are still holding up as shown by April 2019 data. “Passenger demand rose by 4.3% y-o-y in April. Capacity also increased by 3.6%, while passenger load factor climbed 0.6 percentage point to 82.8% — a record for the month of April.”

He said all regions recorded y-o-y passenger traffic increases, led by airlines in Europe (+7.6%) and Latin America (+5.7%). “Asia-Pacific carriers posted a 2.9% traffic rise in April, up from 2% growth in March but well below the long-term average.”

For 2019, de Juniac is expecting airlines to continue to face strong headwinds from rising costs, primarily fuel, labour and infrastructure. Still, IATA anticipates 2019 will be the 10th consecutive year of profitability for the global airline industry where airlines deliver a return on capital that exceeds the industry’s cost of capital.