IATA: Airfreight demand improved in 2016 but profitability outlook remains under strain

IATA, via its 4Q2016 Cargo Chartbook, confirmed (08-Feb-2017) airfreight industry FTKs increased 3.8% year-on-year in 2016, the second highest growth rate since the 2010 rebound after the global financial crisis. IATA reported the following:

• 2016 performance: The increase in demand was despite a moderate deceleration in global economic growth. IATA attributed the growth to favourable cyclical and structural factors and noted a fall in business inventories compared to sales also contributed to improved airfreight performance in 2016, with firms relying on airfreight to replenish inventories. Asian and European carriers accounted for about 64% of FTK growth in 2016. Middle East carriers accounted for 24% and North American airlines accounted for 11%;
• Capacity: AFTKs increased 5.3% in 2016. In-service widebody freighter capacity continued on a upward trajectory for the seventh consecutive quarter in 4Q2016 and payload widebody capacity delivered was the largest within a quarter for the last three years. Available in-storage capacity is about 13% of in-service capacity. Deliveries of new freighters significantly increased since 3Q2016. 2016 was a record year for delivered widebody payload belly capacity. Greater capacity has increased the vulnerability of air carriers to softening demand and could lead to further yield erosion in 2017;
• Yields and profitability: Total international air cargo yields continued to deteriorate in 2016. Average 4Q2016 yields were about 6% lower year-on-year, while jet fuel prices were about 8% higher. The rise in costs combined with decreasing unit revenues points to a worsening profitability outlook;
• Outlook: Global economic growth is expected to accelerate moderately in 2017 as fiscal policies ease, but world trade remains fragile. Consumer confidence remains resilient. Expansion in export orders and strong consumer confidence may boost air cargo demand. The air cargo profitability outlook remains under strain due to increased capacity and rising fuel costs. [more - original PR]