Dive Brief:
- Air freight volume fell for the 13th straight month in November 2019, dropping more than 1% year-over-year (YoY), according to the most recent numbers from the International Air Transport Association (IATA).
- The decline in volume hasn’t stopped the industry from building out capacity, which increased by nearly 3% in November. The trend of falling demand and increasing capacity has pushed down the industry freight load factor, a percentage of the available freight ton kilometers used, down two percentage points from a year ago.
- The demand drop in November is “better than the 3.5% decline posted in October,” Alexandre de Juniac, IATA’s Director General and CEO, said in a statement. “But it is a big disappointment considering that the fourth quarter is usually air cargo’s peak season.”
Dive Insight:
An impending trade deal between the U.S. and China signals good news for the air cargo industry. “But trading conditions at present remain very challenging,” de Juniac said in his statement.
In its second-quarter 2020 earnings call last month, FedEx addressed falling demand in air freight and expanded on its plans to retire aircraft originally announced in September.
“This quarter has seen significant effects on the industrial economy due to continuing trade disputes, including reductions in international air freight and tepid, at best, B2B domestic parcel and freight shipping,” FedEx CEO Fred Smith said on the call.
In response, FedEx said it will cut its flight hours by 68% by Q4 “to better match capacity with demand,” FedEx CFO Alan Graf said.
Gil West, the COO for Delta Air Lines, said at the company’s investor day last month that the it had “seen headwinds this year” on the cargo front as a result of tariffs. But West said cargo would remain an important part of the airline’s strategy, especially considering the speed offered by an air network the size of Delta’s.
“It’s not next day,” West said. “It’s actually within a few hours. We can get anything anywhere.”
There was a glimmer of hope in the most recent IATA numbers: International air freight volumes for European airlines increased 2.6% YoY. And the Africa market continues to show strength, growing by 20% YoY in November.
But the cargo route between North America and Asia is by far the largest and the trade war continues to impact numbers from the regions. Chinese Vice Premier Liu He and President Donald Trump are expected to sign the first phase of a trade deal next week. Many of the tariffs from the trade war will remain in place, but the air cargo industry is hopeful the deal will uplift international trade.
Recent Comments