BAROMETER. The month of June confirmed the boom in air freight. Volume growth stands at 13.4% Y-o-Y for the whole of the first half of 2024, and the drop in freight rates is slowing down.
1/ The evolution of supply and demand
- Traffic June 2024
In June, global air cargo traffic grew 14.1% year-on-year and 0.9% month-on-month, according to figures from the International Air Transport Association (IATA). As such it amounted to approximately 22.1 billion tonne-kilometres. "Similar to the two months prior, the largest contributors to this strong annual surge were carriers from Asia Pacific and Europe, which contributed 40% and 24% to the global increase, respectively", says IATA.
* CTK: cargo tonne-kilometres - Data source: IATA.
- Traffic in the first half of 2024
Cumulatively at the end of June, air cargo volumes are up 13.4% compared to the same period of 2023, 4.3% above 2022's figures, and even 0.02% above the record levels of the first half of 2021. Based on this data, the cumulative traffic for the first 6 months of the year can be estimated at 103.3 billion tonne-kilometres. “These growth rates represent evidence of an exceptionally strong first half of 2024 for air cargo demand, which even surpassed the record levels observed in H1 2021. However, it should be noted that 2024 year-on-year growth rates have been off an overall weak H1 2023 market ” Indeed, at that time, inventories were at their highest, which had pushed wholesalers and retailers to wait before placing new orders.
* CTK: cargo tonne-kilometres - Data source: IATA.
- Capacity
While demand is growing significantly, the increase in capacity remains under control, which is beneficial for airlines. In June, supply measured in tonne-kilometres decreased by 1.7% compared to May (+0.9% seasonally adjusted), amounting to about 50.5 billion tonne-kilometres. Y-o-Y, it posted growth of 8.8% (+10.8% for international operations). The increase in supply mainly concerns international routes, with capacity up 10.8% in June year-on-year. This growth is driven by the available belly-hold capacity of passenger aircraft, which posted their 38th consecutive month of double-digit growth in June (16.8% year-on-year). At the same time, all-cargo capacity grew by only 4.1%.
This differential between the growth of supply and that of capacity allows a further improvement in the load factor. This amounted to 45.8% in June, up 1.2 percentage points compared to May and 2.1 percentage points compared to June 2023. Internationally, the load factor stood at 50.8%, also up 2.1 points year-on-year. The improvement in this ratio benefits airlines in all regions, with the exception of African and Latin American airlines.
For the first half of 2024 as a whole, overall capacity growth amounted to 9.4% year-on-year (12.2% for international operations). Overall, the load factor increased by 1.6 points to 45.4%, and was stable internationally at 51.1%.
2/ Price trends
Despite the strong growth in demand, there is no overall tension on access to capacity, because the supply is there. As a result, prices are still on a downward trend, but the decline is slowing down, and there are exceptions. This is particularly the case for the Asia-Europe corridor where freight rates are rising, month-on-month and year-on-year. This is due in particular to the disruption of maritime transport on this route. Bypassing Africa via the Cape of Good Hope to avoid Houthi attacks in the Red Sea significantly lengthens shipping times, which may direct some shippers to air cargo in emergencies or for certain types of products.
Source: Upply Freight Index
According to IATA, average unit revenue, on all routes combined and surcharges included, increased by 0.8% month-on-month and 4.7% year-on-year. June marked the second consecutive annual increase after a series of declines that began in mid-2022. "However, these increasing annual growth rates are mainly linked to a sharply decreasing base in 2023," says IATA. In addition, the increase is also fed by the impact of the increase in fuel.
Over the whole semester, prices remained relatively low, except on the Asia-Europe corridor where erosion was limited to -3.3%. Despite this, companies' unit revenues remain above pre-Covid levels.
3/ Evolution by zone
Since October 2023, airlines in all regions have benefited from the growth in international air cargo volumes, to varying degrees. In June, all areas recorded a double-digit increase.
Similarly, all major global air cargo routes contributed to the increase, but again in varying proportions. The record goes to the Asia-Africa and Middle East-Europe corridors, with increases of 37.5% and 30.2% respectively, points out IATA. Intra-Asian flows are also very dynamic, up 21%. The two main global air cargo routes, Asia-North America and Asia-Europe, recorded increases of 12.8% and 20.3% respectively. “To date, the US customs crackdown on e-commerce deliveries out of PR China has failed to produce an obvious impact on air cargo traffic on the Transpacific route.” notes IATA. The North America-Europe corridor remains the least dynamic, but still with an increase of 6.8%.
4/ Mixed economic signals
The global economic environment presents mixed prospects.
In June, the PMI of global manufacturing production remained in expansion territory, remaining above the threshold of 50 points, reaching precisely 52.3 points against 52.8 in May. This is the sixth consecutive expansion and a positive development that is expected to continue to fuel the growth of air cargo flows.
On the other hand, the PMI of new export orders, which captures trends in international trade, recorded a slight contraction in June (49.3 points), thus falling below the critical bar of 50 points. This result comes after two months of optimistic prospects, which had themselves ended a long period of decline. In detail by region, we find that the index of new export orders for the United States fell just below the 50-point mark, as did the overall indicator. On the other hand, Chinese purchasing managers continued to make optimistic forecasts, as they have done since January. In Europe and Japan, the index confirms the contractionary signals observed since March 2022.
Global cross-border merchandise trade expanded in May, but remains very modest as it grew by only 0.1% month-on-month and 0.2% year-on-year.
The air cargo industry therefore continues to operate in an extremely unstable economic and geopolitical environment. The improvement in the first half of the year, to be put into perspective given the particularly low levels of 2023, remains fragile. However, a continuation of shipping disruptions could promote a dynamic peak season in the second half of the year.
