Average global yield increase set to drop to around 2% next year, well below the ‘exceptional’ 10% average price increase in 2018, IATA predicts.
Global air freight is expected to grow by around 3.7% next year, broadly in line with its growth levels this year, bolstered by growing cross-border e-commerce traffic but facing headwinds from slowing world trade growth and geopolitical issues including national protectionism and Brexit, according to the latest analysis by the International Air Transport Association (IATA).
Speaking at IATA’s annual media event last week, IATA chief economist Brian Pearce noted that the 3.7% annual increase in cargo tonnage to 65.9 million tonnes is the slowest pace since 2016, “reflecting the weak world trade environment impacted by increasing protectionism”. But he said the relatively weak growth in the last few months was typical of the end of the restocking phase that traditionally boosts air freight at the start of a new cycle of economic growth and then tails off as inventory levels catch up with demand. Nevertheless, the two-year boost to air freight since the end of 2016 was longer than during previous cycles, “suggesting that something else is going on – probably the growth in cross-border e-commerce”.
IATA’s most recent figures note that air freight volumes have “continued to trend upwards moderately in seasonally adjusted terms into the final quarter of the year”. For example, freight tonne kilometres (FTKs) carried have risen at an annualised rate of just under 4% over the past six months, and at a similar level for 2018 as a whole.
Pearce noted that cargo yields are expected to grow by around 2% in 2019, well below the “exceptional” 10% yield growth in 2018. But that increase “does, however, continue the recent strengthening of the (air) cargo business”, particularly since cost increases are expected to be lower in 2019 as the price of oil is expected to fall as next year progresses.
The expected slight rise in cargo yields next year, combined with expected growth of between 3% and 4% mean overall air cargo revenues are expected to rise by around 5% in 2019 to reach US$116.1 billion − up from a predicted $109.8 billion in 2018. And the rise in average yields next is expected to come despite an expected continuing “easing of load factors”, Pearce told Lloyd’s Loading List. IATA’s most recent monthly figures indicate that air freight capacity growth in October outpaced that of demand for the eighth month in a row, largely thanks to growth in passenger bellyhold capacity, a trend expected to continue in 2019.
Nevertheless, Pearce pointed out that over the last 20 years, the cost of using air freight for shippers has been cut in half, delivering a significant benefit for customers’ supply chains. Indeed, the increases in average yields in 2017 and 2018 following a near decade of reductions in average air freight prices, he noted.
Meanwhile, looking at wider expected economic growth, Pearce said GDP is forecast to expand by around 3.1% in 2019, marginally below the 3.2% expansion in 2018, describing “this slower but still robust growth” as “a main driver of continued solid profitability” among the airline sector as a whole. He added: “There are significant downside risks to growth from trade wars and political uncertainties such as with Brexit, but the consensus view is that these factors will not offset the positive impetus from expansionary fiscal policy and growing business investment in major economies.”
Source: Lloyd’s
