Abu Dhabi, UAESunday 26 January 2020

Global air cargo to see a modest rebound in 2020, Iata says

Air freight to grow more than 2 per cent next year after a 3.3 per cent decline in 2019

Middle Eastern airlines’ freight volumes decreased 3 per cent in November 2019 compared to the year-ago period, according to Iata. Bloomberg
Middle Eastern airlines’ freight volumes decreased 3 per cent in November 2019 compared to the year-ago period, according to Iata. Bloomberg

Global air cargo, an indicator of economic health reflecting international trade, is expected to recover in 2020.

Global air freight traffic is forecast to grow 2.2 per cent in 2020 after a decline of 3.3 per cent in 2019, according to the International Air Transport Association. Cargo revenue will stabilise next year after dropping 8 per cent in 2019.

"We have a very modest rebound next year," Andrew Matters, deputy chief economist at Iata, told reporters in Geneva.

Iata's forecast for freight tonne kilometres (FTKs), a measure of air cargo traffic, assumes a "truce" in the tariff war that has raged between the world's two biggest economies.

Global trade weakened and economic growth slowed down, hurting demand and business confidence. As a result, 2019 is likely to be the weakest year for air cargo volumes since the 2008 global financial crisis, according to Iata.

The recovery in the air cargo industry is "fragile", Mr Matters said.

Risks to the outlook include concerns about the impact of the trade war, a US recession rocking the global economy, policy uncertainty weighing on global economic growth, geopolitical tensions and the possibility of a no-deal Brexit.

In an interview with The National, Mr Matters said Asia-Pacific is the region that is most likely to lead the small rebound in air cargo markets expected next year.

"Asia-Pacific has bore the brunt of the US-China trade tensions… so any truce there or if we’re lucky, some improvements in trade negotiations, should benefit the region," he said on the sidelines of Iata's annual media gathering in Switzerland.

"Its one of world’s key manufacturing and distribution hubs. Cargo is a larger part of business for airlines in Asia-Pacific than in other regions, so that will help support the airlines more broadly."

Despite cautious optimism for a recovery in air cargo markets fuelled by projections for strengthening global economy next year, the industry will still see pressure on yields.

"The outlook for global GDP is expected to improve so the improvement in economic activity should help to support demand, which we hope will have a positive impact on air cargo," he said.

"We don’t have strong expectation of revenue surge, it’s a stabilisation in revenue after a big fall of 8 per cent this year. It's not a strong bounce but stabilising. There will still be some pressure on yields next year but the support of the demand environment will help."

Improving business confidence in some emerging markets, if it can be sustained and lead to stronger economic activity, can also have a positive impact on air cargo, Mr Matters said.

Iata has based its air cargo forecast on assumptions of a trade truce next year between US and China, so any deterioration in negotiations will impact its forecast.

“In world trade, the US-china [issue] is the biggest and most visible. But it’s not the only game in town. We are hopeful that we won’t see the situation worsen but that’s a key risk going forward,” Mr Matters said.

“Essentially we have a trade truce: they are not going to be best of friends again but equally we are not expecting a deterioration. If it deteriorates then it will materially impact our forecast going forward."

Iata has based its forecast on an assumption of oil prices at about $63 per barrel.

While oil prices are a key factor for airlines, with fuel costs representing a quarter of their total costs, the major concern now for air cargo industry is the weakness in overall market demand, Mr Matters said.

Updated: December 13, 2019 03:57 PM

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