With ‘restocking’ over, IATA predicts slow growth, higher yields in H2

The air cargo industry must prepare for slower growth in freight tonne kilometers (FTKs) in the second half of 2018, but should have stronger yields, thanks to high aircraft utilization that may offset rising costs, according to IATA’s latest “Cargo Chartbook” report for the third quarter.

In the Q3 report, IATA said annual growth in FTKs slowed to 2.8 percent in the three-month period ending on July 31, representing the industry’s “slowest pace on this basis in more than two years.” FTKs, the group found, are continuing to rise in seasonally adjusted terms, but “the upward trend has slowed markedly from that seen during the best of the upturn in air freight last year.”

Much of this is due to the inventory restocking cycle at the world’s retailers and warehouses, IATA said. While restocking spurred airfreight growth “to outperform that of wider global trade in 2016/17,” the cycle has “run its course.” Also, IATA noted that momentum in world trade appears to be weakening “against a backdrop of rising trade protectionism measures,” referring to the trade-war tariffs that erupted this spring between the U.S., China and several other countries.

One of the brighter spot in the report concerned cargo yields, which “have continued to trend upwards in H2 2018, albeit at a slower pace than a year ago,” IATA said. “While the industry-wide load factor is trending down, ongoing high rates of freighter aircraft utilization will continue to help to reduce average costs, and to help offset ongoing upward pressure on costs, particularly from higher fuel prices.”

When surveyed in early July, airline heads of cargo told IATA they were “positive about the outlook for freight volumes over the next 12 months, albeit slightly less so than they were earlier in 2018.” That said, IATA’s respondents were “increasingly positive about the outlook for cargo yields.”