Air cargo demand to remain weak in 2016, IATA says

As we draw toward a close of a volatile 2015 that saw airfreight demand skyrocket in the early months only to cool down and stagnate for much of the rest of the year, the International Air Transport Association (IATA) is predicting continued sluggishness for most of 2016, thanks to continued weak growth in world trade, a slowdown in China, falling commodity prices, and an expected interest rate hike in the United States.

In its 2016 outlook, IATA does predict that airfrieght demand will increase next year by 3 percent, compared to 1.9 percent growth seen in 2015, which slightly ahead of the expected 2.7 percent GDP growth. However, this pace is expected to be muted by changes in today’s supply chains. “Prior to the Global Financial Crisis, this pace of economic growth would have generated much faster international trade and air cargo growth, but that pattern of growth appears to have stopped as companies bring supply chains closer to home,” IATA said.

The association said the industry is expected to transport 52.7 million tonnes of cargo, globally, in 2016, compared to about 51.3 million tonnes this year. The increase, IATA said, would have been even higher were it not for “a tough global economic environment and feeble world trade” that have conspired to subdue airfreight demand. “Emerging markets have struggled — a slowdown in China has sent commodity exporters wobbling,” the report stated.

Julie Perovic, senior economist at IATA, told the Wall Street Journal that average airfreight load factors are at a six-year low, adding that the state of the air cargo industry is currently “quite a dismal picture.” Much of this decline, IATA said, is due to a continued belly capacity glut from the rise in passenger aircraft.

In total, air cargo revenues are expected to fall from and estimated US$52.2 billion in 2015 to $50.8 billion in 2016, IATA said. Average yields will fall by 5.5 percent in 2016, a significant improvement on 2015 when yields are expected to slump by 18 percent, partly due to the appreciation of the U.S. dollar, which impacted non-dollar revenues. However, low oil prices are offsetting the impact of the weak performance by the cargo sector, IATA said.

Overall, IATA added, airlines are doing quite well when passenger figures are included. Demand for passenger travel grew by 6.7 percent this year, IATA said, and is expected to rise by 6.9 percent in 2016. Tony Tyler, director general of IATA, said industry will likely earn a record net profit of $36.3 billion in 2016, compared to the strong $33 billion showing in 2015. Previously, IATA had predicted 2015 earnings of $29.3 billion. More than half of these profits will come from North American carriers, he added.