Air cargo to enjoy highest growth since 2010, but huge structural overcapacity still exists

In the nine months to Sep-2017 world air freight traffic, measured in freight tonne kilometres, increased by 10.1% year-on-year, according to data from IATA. The increase for the month of Sep-2017 was 9.2% year-on-year, a deceleration from 11.6% in Aug-2017, and IATA postulated that freight traffic growth may have passed its cyclical peak.

Nevertheless, it seems probable that full year growth in 2017 will exceed IATA's forecast of 7.5%, making it the highest since it reached 19.4% in 2010. Growth in cargo traffic has been much faster than capacity growth, driving an increase in cargo load factor.

However, at just 44.4% for the first nine months of the year (broadly where it has been for years), cargo load factor should be seen as unacceptably low. Put another way, this statistic means that air cargo supply is more than twice the level of demand. In passenger belly space, the situation is even worse: only 27% of capacity is typically filled.

Little wonder that air cargo suffers from chronic yield weakness. This may be a relatively good year for air cargo, but it will not remove the huge structural overcapacity problem.