Air Cargo Market Analysis January 2020 [629022]

Air Cargo Market Analysis – January 2020 1
Air Cargo Market Analysis January 2020
Challenging time for air cargo in the period ahead…
• Industry -wide air cargo tonne kilometres contracted by 3.3% year -on-year in January, about a 2 percentage point s
faster pace of decline compared to the previous month. Seasonally adjusted volumes also ticked down amidst a
softer performance from European and Middle Eastern carriers.
• The timing of the Chinese New Year holiday along with the progress in the US -China trade negotiations helped to
postpone the bulk of the negative impact of the coronavirus on air cargo till February.
• With capacity growing against contracting demand , the industry -wide cargo load factor eased by 1.9 percentage
points over the past twelve months .
Air cargo started the year on the soft note
Industry -wide air cargo tonne kilometres (CTKs)
decl ined by 3.3% y ear-on-year in January compared
to the 1.4% annual contraction in the previous month .
The underlying seasonally adjusted (SA) air cargo
volumes also eased (Chart 1) , driven by a softer
performance of European and Middle Eastern carriers.
Chart 1: CTK levels, actual and seasonally adjusted

Challenging times for air cargo business ahead…
We will have to wait for February data to see the full
impact of the coronavirus on air cargo business.
Spread ing quickly from China to the rest of the world,
COVID -19 has led to travel restrictions, factory
shutdowns, disrupted supply chains as well as
mounting economic damage to affected countries.
However, t he main disruption s from the virus started
only after the closure of the Wuhan airport in China in
late -January . The period initially coincided with the
Chinese New Year holiday s, when offices and factories
in the country are typically closed , and with positive
progress in the US -China trade negotiations. As a
result, the impact of the virus on CTKs did not
materialize immediately . Indeed, despite another
month of the year -on-year contraction, the SA
volumes for Asia Pacific carriers ticked up in January .
Drawing parallels with historical health outbreaks to
understand the COVID -19 impact might be
misleading . Prior to the SARS outbreak , China (where
the disease originated ) had a 5% share in global trade
and a 10% share in the global manufacturing sector
(Chart 2) . These shares have increased sharply over
the years to about 13% and 39%, respectively . As a
result, the SARS experience could underestimate
today’s effect on trade, including air cargo .
Chart 2 : Change in China’s economic importance

141516171819202122232425
2016 2017 2018 2019 2020Industry CTKs (billion per month)
Actual
Seasonally
adjusted
Sources: IATA Economics, IATA Monthly Statistics
4% 5%10%
5%16%
13%39%
18%
Share in World
EconomyShare in Trade
(Exports + Imports)Share in
ManufacturingShare in Travel&
Tourism2002 2018
Source: IATA Economics using data from the IMF WEO, UN, WTTC

Air cargo market overview – January 2020
World
share1CTK ACTK CLF (%-pt)2CLF (level)3CTK ACTK CLF (%-pt)2CLF (level)3
TOTAL MARKET 100.0% -3.3% 0.9% -1.9% 45.0% -3.2% 2.2% -2.6% 46.7%
International 86.8% -3.4% 0.2% -1.8% 48.4% -3.8% 1.8% -3.0% 51.8%
1% of industry CTKs in 20192Year-on-year change in load factor3Load factor levelJanuary 2020 (% year-on-year) % 2019

Air Cargo Market Analysis – January 2020 2
Operating backdrop was improving ahead of the
coronavirus outbreak…
The global operating conditions for air cargo business
were stabiliz ing ahead of the coronavirus disruptions
in late -January . Following more than two years of
trade tensions, the United States and China signed a
phase one trade agreement in the middle of the month .
As a result, the trade tariffs between the two countries
should decrease and new tariffs be postponed , easing
pressure on international trad e flows , particularly
between Asia and North America.
The latest surveys were pointing to an improvement in
exporter strength at the global level ; year-on-year
growth in the new export orders component of the
global Purchasing Managers’ Index – a useful leading
indicator of global CTK growth in the past – stabilized
in January (~0% growth) afte r almost two years of
contraction (Chart 3).
Chart 3: Global new export orders component of PMI

The se positive developments along with the later
timing of the Chinese New Year holiday helped to
counter the negative impact of the coronavirus on the
air cargo business in January. However, the downward
pressu re on volumes has significantly increased since
then . Factor y shutdown s in China have been weighing
on the country’s manufacturing sector and ha d
spillover effects on produc tion elsewhere in the world
which rely on Chinese parts and components. The
impact has been broad -based from the automobile
indust ry, luxury goods to semiconductors that are
typically shipped by air.
Chart 4: CTK demand heat -map (monthly data from
manufacturing PMIs, selected countries)
Indeed, m anufacturing export order books ha ve been
falling in response to the virus across major
manufacturing economies (Chart 4) . The falls were
particul arly large in China (the lowest reading since
the Global Financial Crisis) and South Korea , based on
the l atest available data.
The industry -wide load factor continues to decrease
Year -on-year growth in industry -wide available cargo
tonne kilometres (A CTKs) eased to 0.9% , down from
3.8% in December. With capacity expanding against
contracting demand, the industry -wide cargo load
factor fell by 1.9ppt s vs a year ago .
Downward pressure on international CTKs increased…
International CTKs were down by 3.4% year -on-year in
January ; a 1.9ppt s faster pace of contraction
compared to that seen in Dec ember . The annual
growth performance deteriorated across all regions
but the Americas where the growth however remained
negative (Chart 5).
Chart 5: International CTK growth

The disruptions from the Wuhan virus will negatively
impact air cargo developments across all of the key
international trade lanes. Markets linked to Asia will be
particularly exposed, including the two largest – Asia –
Europe and Asia -North America which together
account for more than 40% of international segment –
based traffic (Chart 6).
Given the increasing occurrence of the virus also
outside of Asia Pacific region , some of the other key
markets will be hit, too . This includ es the recently
robustly performing Within Europe market ( 2.8% share
and 3.0% growth in 2019 ).
Africa n airlines continue to lead the growth chart…
African carriers topped the international CTK growth
chart for the 11th consecutive month amidst solid
-50%-40%-30%-20%-10%0%10%20%30%40%% year -on-year
Sources: IATA Economics, Markit
New export orders Legend: >50 and rising = green ; >50 but falling = yellow ; <50 = red
Germany 1 1 2 2 2 2 2 2 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3
Japan 1 2 1 2 2 3 2 3 3 2 2 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3
China 2 2 2 3 3 3 3 3 3 3 3 3 2 3 2 3 1 3 3 3 3 1 1 1 3 3
US 1 1 2 2 2 3 3 1 1 2 2 1 2 2 2 2 3 1 3 3 3 1 2 2 3 3
Korea 1 1 3 3 3 1 1 3 3 3 3 3 3 3 3 3 3 3 3 3 1 3 3 1 1 3
Global 1 1 2 2 2 2 2 2 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3
Highly supportive Partly supportive Least supportive
Sources: IATA, Markit, Thomson Reuters Datastream2019 2018 2020
-3.3%-1.4%-2.8%-1.1%-4.4%11.2%-2.1%
-5.1%-3.7%-2.6%-1.4%-0.7%7.0%-3.4%
-12% -10% -8% -6% -4% -2% 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% 22%Jan 2020 Dec 2019
International cargo tonne kilometres (% year -on-year)Industry
Africa
L. America
Middle East
N. America
Europe
Asia Pacific
Sources: IATA Economics, IATA Monthly Statistics

Air Cargo Market Analysis – January 2020 3
growth on the smaller Africa -Asia trade lanes (up
12.4% in 2019 ). However, the 7.0% expansion in
January represent ed a sharp slowdown from
December and also a so fter pace compared to H2
2019 (average of 11%). SA air cargo volumes also fell,
but the drop did not distort a n underlying solid upward
trend that emerged in mid -2018 . The relatively small
size of Africa market (1.8% of the total) helps to explain
the larger volatility this month.
Chart 6: Inte rnational CTKs by route (segment -based)

Best outcome for Lat.Am carriers since mid -2019
International CTKs reported by Latin American
airlines were down 0.7% year -on-year in January, an
improvement on the 4.4% decline in December and
the best outcome since July 2019. The underlying SA
CTKs also ticked up, underpinned by new route
connecti ons . That said, the less supportive economic
backdrop exacerbated by supply chain disruptions
from the COVID -19 outbreak represent a downside
risk to demand in the near -term .
Chart 7: SA i nternational CTKs , largest markets
Slightly faster contraction in the Middle East…
International CTKs for Middle Eastern airlines
contracted by 1.4% year -on-year, an only moderately
faster pace compared to the previous month ( -1.1%).
In SA terms, the mod est upward trend remained in
place despit e the fall i n volumes this month (Chart 7).
The region’s improved performance has been
supported by recent expansion on the Middle East –
Asia routes (data until December). However, t his
marke t is important for connecting trade from China to
the rest of the world, mainly Europe , and therefore has
a large exposure to COVID -19 disruptions .
…while pressure on CTKs eased in North America
North American carriers posted a broadly unchanged
pace of annual decline in international CTKs from the
previous month (revised) , at -2.6% . The seasonally
adjusted CTKs trended higher for another month
(Chart 7) , amidst a more supportive operating
backdrop in the US and optimism about the US -China
trade negotiations.
Europe an carries underperformed in Januar y
European carriers were one of the weakest
performers this month , posting a 3.7% year -on-year
decline in international air cargo – more than twice the
pace in December (at -1.4%) . The underlying SA
volumes also went sharply down , disrupting the
modest upward trend that emerged since mid -2019
(Chart 7) . The rising occurrence of the coronavirus in
the region will exacerbate the weakness in both the
European economy and manufacturing sector ,
putting additional pressure on CTKs in the near -term.
Asia Pacific at the bottom of the growth chart…
International CTKs flown by Asia Pacific airlines
contracted by 5.1% in January 2020, a 1.8 ppts
sharper contraction than that seen in the previous
month. That said, the underlying SA cargo volumes
ticked up (Chart 7) amidst the US -China trade deal
progress and stabilization in the manufacturing
sector . This along with t he late -January timing of the
Chinese New Year holidays helped to delay the
negative impact of the coronavirus into February.

IATA Economics
economics@iata.org
4th March 2020
Afr -EurAfr -Asia
Afr -MEEur -Asia
Eur -MEEur -Nth AmEur -Sth Am
Asia -Nth AmAsia -SW PacME -Asia
ME -Nth AmNth -Sth AmWithin Eur
Within Asia
-10%-8%-6%-4%-2%0%2%4%6%8%10%12%14%
0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% 22%
Share of total international CTKs (%, Year -ended Dec 2019)
Sources: IATA Economics, IATA Monthly Statistics by RouteInternational CTK growth by route (% 2019)
859095100105110Seasonally adjusted international CTKs (indexed, Jan 2018 = 100)
Asia Pacific Europe Middle East North America
Source: IATA Economics, IATA Monthly Statistics

Air Cargo Market Analysis – January 2020 4

Please note that as of January 2020 onwards, we have clarified the terminology of the Industry and Regiona l series
from ‘Freight’ to ‘Cargo’ (the corresponding metrics being FTK (change to ‘CTK’), AFTK (change to ‘ACTK’), and FLF
(change to ‘CLF’)), in order to reflect that the series have been consisting of Cargo (Freight plus Mail) rather than
Freight. The d ata series themselves have not been changed. Airline individual data retain the FTK metric .
Air cargo market detail – January 2020
World
share1CTK ACTK CLF (%-pt)2CLF (level)3CTK ACTK CLF (%-pt)2CLF (level)3
TOTAL MARKET 100.0% -3.3% 0.9% -1.9% 45.0% -3.2% 2.2% -2.6% 46.7%
Africa 1.8% 6.8% 5.9% 0.3% 35.6% 7.4% 13.3% -2.0% 35.5%
Asia Pacific 34.5% -5.9% 0.0% -3.0% 47.4% -5.7% 1.1% -3.7% 52.2%
Europe 23.6% -3.7% -3.0% -0.3% 50.1% -1.9% 3.4% -2.8% 51.6%
Latin America 2.8% 1.4% 2.4% -0.3% 31.1% -0.2% 4.8% -1.7% 35.0%
Middle East 13.0% -1.4% 2.9% -1.9% 42.6% -4.6% 1.1% -2.7% 46.6%
North America 24.3% -1.3% 3.4% -2.0% 42.4% -1.0% 2.0% -1.2% 39.6%
International 86.8% -3.4% 0.2% -1.8% 48.4% -3.8% 1.8% -3.0% 51.8%
Africa 1.8% 7.0% 7.8% -0.3% 36.1% 7.8% 13.8% -2.0% 36.2%
Asia Pacific 30.4% -5.1% 0.4% -3.1% 52.8% -6.3% 0.0% -4.0% 58.8%
Europe 23.3% -3.7% -3.3% -0.2% 51.8% -1.8% 3.3% -2.8% 53.4%
Latin America 2.3% -0.7% 0.2% -0.4% 38.9% -2.2% 2.4% -2.0% 43.1%
Middle East 13.0% -1.4% 2.8% -1.9% 42.7% -4.6% 0.9% -2.7% 47.0%
North America 16.1% -2.6% 0.9% -1.6% 45.7% -2.4% 1.5% -1.9% 46.6%
1% of industry CTKs in 20192Year-on-year change in load factor3Load factor levelJanuary 2020 (% year-on-year) % 2019
Note: the total industry and regional grow th rates are based on a constant sample of airlines combining reported data and estimates for missing observations. Airline traffic is allocated
according to the region in w hich the carrier is registered; it should not be considered as regional traffic. Historical statistics are subject to revision. Get the data
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