Hello everyone, it’s time again for this month’s Air Freight Market Report.

 

Let’s take a look at how the IATA report is written. Likewise, I will translate the full text for your reference.

 

Air cargo traffic hits record high in March

• Despite slow growth compared to February, global freight volumes reached our all-time high. Industry-wide cargo ton-kilometres (CTK) increased by 4.4% compared to pre-crisis levels and 0.4% month-on-month.
• The near-term outlook for freight is upbeat, as some key demand indicators, such as new export orders, continue to pick up. In 2021, CTK is estimated to grow 13.1% from 2020 and 2.8% from 2019.
• Cargo volumes have recovered due to disruptions caused by the grounding of passenger planes in early 2021. However, global available freight ton-kilometres (ACTK) are still about 12% below pre-crisis levels.

Global air cargo demand continues to improve, supported by broader economic recovery

Global air cargo volumes reached a record high in March against the backdrop of an improving macro economy. Compared to March 2019 pre-financial crisis levels, industry-wide freight ton-kilometres (CTKs) increased by 4.4% and 0.4% month-on-month (blue line in Figure 1). Although this represents a slower pace of growth compared to February (9.2% compared to 2019 and 1.8% month-on-month), it is still a strong result compared to 2020.

 

In the first quarter of 2021, the global CTK increased by 5.6%, compared to the first quarter of 2019, an increase of 14.1%. Note, however, that the latter figures are somewhat inflated due to poor comparisons with the base year.

 

The weaker growth compared to February was mainly due to weaker performance by Asia Pacific and African airlines, which reported a 2.5% and 5.9% month-on-month decrease in CTK, respectively. The best performer this month was the Middle East carrier, whose cargo volumes rose 4.4% month-on-month.

 

The underlying drivers of air cargo demand remain positive. The latest PMI monthly survey shows that global export demand is recovering as countries emerge from lockdowns and business activity restarts. Indeed, the global new export orders component of the manufacturing PMI rose to 53.4 in March from 51.0 in February, with anything above 50 implying an increase compared to the previous month. Since order book growth has historically correlated with CTK growth, this bodes well for near-term freight developments (Figure 2).

 

A more detailed view shows that export demand increased in most major markets in March (Figure 3). But while exports have been recovering for some time in developed countries, emerging markets have only recently seen a turnaround, as some major exporters such as China have shown an increase in overseas demand.

 

The PMI survey also showed that supplier lead times increased by another month as suppliers struggled to keep up with the recovery in economic activity, a typical pattern during recessionary recovery periods in the economic cycle. As a result, some businesses are turning to air freight to transport goods in order to meet delivery deadlines. That said, contrary to our expectations, the Ever Given ship blocked the Suez Canal in late March, with limited impact on air cargo volumes. This was most likely due to the rapid withdrawal of the vessel (about 6 days), which avoided any major supply chain disruption. Indeed, CTK on the Asia-Europe trade route (the main alternative to shipping via canals) actually declined slightly from February, down 3%.

 

The global economic backdrop has been improving strongly and should continue to support freight demand in the near term. The global composite PMI, an indicator of economic activity, reached its highest level since mid-2014 in March, and expectations for future output also turned more optimistic.

 

Global merchandise trade also continued to recover. Global trade volumes rose 0.3% month-on-month in February – the ninth consecutive month of growth and the longest streak in more than 20 years, according to the latest CPB data.

 

Our short-term forecast for the industry reflects these positive developments in the operating environment. CTK is expected to grow by 13.1% compared to 2020 and 2.8% compared to 2019 (Figure 4). This is in stark contrast to the passenger side of the company, which continues to be heavily impacted by international travel restrictions (estimated RPK this year is still only 43% of 2019 levels).

Freight capacity is getting back on track

Cargo capacity has recovered from a temporary drop in early 2021, when some airlines grounded their passenger planes due to a rise in COVID-19 cases. Industry-wide available freight tonnages (ACTKs) rose 5.6% month-on-month in March and are now around 12% below pre-crisis levels (March 2019). A more detailed view shows that international capacity on some selected freighters increased by 20.6% compared to the same month in 2019, while belly capacity fell by 38.4% over the same period.

 

The situation across the industry does not fully reflect the differences between regions. The Asia-Pacific and North American airlines saw the fastest capacity growth, up 13.3% and 6.5% month-on-month, respectively, with ACTK in the latter group reaching pre-crisis levels (up 3.8% compared to March 2019). On the other hand, capacity recovery in Europe and Latin America has been at a standstill.

 

Market demand rose in March, but capacity contracted instead, so cargo load factors remained high in most regions in March. The industry-wide freight load factor was 58.8%, up 9 percentage points from March 2019, before the crisis. Among these regions, European carriers recorded the largest CLF on average at 68.5%.

 

International freight performance varies across regions

International CTK did not grow at the expected pace in March (up 0.1% from February) as weaker results reported by carriers in Asia Pacific and Africa offset improvements elsewhere (Figure 6). The bigger picture, however, remains that CTK is well above pre-crisis levels, up 4% compared to March 2019 (Figure 7).

Africa slows, but remains strong

International CTK growth gained momentum in March, with African airlines showing the fastest growth in international CTK (up 24.6% compared to pre-crisis March 2019). Having said that, they were a bit weaker compared to February’s exceptionally strong performance. Economic growth was boosted by an unprecedented 107% increase in the Africa-Asia trade route in February. Despite this month’s weaker results, African airlines’ CTK remains near record highs.

 

Strong economy supports North American cargoes

North American international freight volumes showed an upward trend in March, maintaining a 1% month-on-month increase (Figure 6). Compared to pre-crisis levels, CTK increased by 14.5% in March, a slower pace than in February, in part due to a stronger base in March 2019. The outlook for freight in the region remains positive due to positive developments in underlying demand drivers. U.S. GDP grew at an annual rate of 6.4% in the first quarter, up from 4.3% in the fourth quarter, bringing the country’s economy close to pre-crisis levels. In addition, the new export orders component of the manufacturing PMI index rose to its highest level since 2007, suggesting further improvement in freight volumes in the near term.

The Middle East showed the fastest sequential growth rate

Middle Eastern airlines had the fastest month-on-month increase in international CTK of all regions in March at 4.4%. Comparisons with the pre-crisis period also improved, with a 9.2% increase in March this year compared to March 2019. On the Middle East-North America and Middle East-Asia routes in particular, this volume was supported by strong trade flows from CTKs, which increased by 28% and 17% respectively compared to two years ago.

 

Slight improvement in Europe but decline in Asia Pacific

International CTKs for airlines in Europe and Asia Pacific hovered close to pre-crisis levels in March (Figure 7), but the underlying changes in levels differed. European CTKs showed positive month-on-month growth (+1.2%), supported by an improving operating environment, including a recovery in export orders. By contrast, international CTKs operated by airlines in the Asia-Pacific region fell 2.7% month-on-month, a weakness seen in most major trade lanes linked to Asia. At the moment, it is unclear what caused the setback, as we did not observe a significant drop in capacity or a surge in freight rates compared to February.

 

Latin American airlines continue to lag

Latin American airlines, still at the bottom of the growth chart, saw a nearly 24% drop in international CTK compared to March 2019. Demand recovery in the region has stalled since the third quarter, with already weak supply starting to worsen recently (-4.3% m/m in March). The continued sharp capacity contraction is likely to be the cause of the delay in the rebound in freight volumes.

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