IATA Cuts Air Cargo Traffic Growth Forecast

The International Air Transport Association, IATA reduced the annual traffic growth forecast from the previous estimate of 3.7% to 2%. The reasons cited for the reduction in forecast ranges from anti-globalization propaganda, Brexit and trade tensions. The growth of IATA now is increasingly dependent on passenger revenue for its growth.

Asia plays an important role:

The air-freight is dominated by Asian airline and accounts for 40% of the market globally as this region is the manufacturing and e-commerce hub. Due to the current economic conditions in China and other major regions of Asia, which includes the slowdown in the manufacturing sector, weak exports, and trade dispute the air cargo dropped by 3.6% as per the data published by IATA. The trend of falling air cargo traffic started in 2018 after a stupendous growth in 2017.

The leading cargo airlines in the world like Singapore Airlines, Cathay Pacific and Air China reported a shortage of demand for international cargo while the data for other airlines for January is expected soon.

Goh Choon, the CEO of Singapore Airlines said in an interview on Tuesday, “The air cargo industry continues to face challenges from the evolving world trade tensions. World trade is at a crossroads given the protectionist stance taken by some parts of the world.”

Meanwhile, Andrew Herdman the Director General of Asia Pacific Airlines said in an interview that the trade tensions has reduced the export orders and thus the demand for cargo too. He said, “The first quarter looks weak from a macro-economic outlook but as for the rest of the year it very much depends on whether the trade disputes drag on or whether there are some resolutions.”

Airlines more dependant on passenger airline growth:

With the airlines not reaching the estimate for 3.7% growth in traffic that was predicted in December, the onus is now on the passenger airlines if the companies have to show revenue growth. After announcing the reduction in growth, the IATA Director Alexandre de Junaid said in a conference in Singapore, “Developments in the political climate are not going in our favor. Weaker global activity and consumer confidence led to a 1.8% fall in global air freight traffic in January marking the worst performance in three years.”

Though other cargo carriers are yet to release the data for January, the expectations are that the numbers will be less than the estimates in December which is a cause of concern for the cargo airlines.

Mattie Kirkpatrick

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