Global air growth slows markedly in March; end of restock cycle to blame

After a long string of gains that reminded industry veterans of the halcyon days of the 1990s, when seemingly every ton of goods went on a plane, international air freight demand hit a wall in March, slowing to a pace not seen in nearly two years due to the end of a strong cycle of inventory restocking, the International Air Transport Association (IATA) said today.

The leading global airline trade group said that freight ton-kilometers, defined as one ton of freight flown one kilometer, rose 1.7 percent in March compared to the same period in 2017. This was five percentage points lower than the year-over-year results in February, and the slowest growth rate in 22 months, IATA said.

Freight capacity year over year gained 4.4 percent in March, IATA said. Though capacity in March grew at a slower pace than in the prior month, it still represented the first time in 20 months that capacity exceeded demand, IATA said. One of the hallmarks of the current expansion cycle is that airlines have been able to keep control of their capacity in spite of significant demand growth.

IATA has forecast that freight demand would slow once the current restocking cycle runs its course. Over the past 12-18 months, businesses rapidly increased their inventories to meet unusually strong end demand. The speed of airfreight is crucial in accommodating sharp spikes in goods demand. IATA also reported a slowing in global trade activity, whose strength in recent months had pundits talking about a synchronized worldwide economic recovery.

Alexandre de Juniac, IATA's director general and CEO, said the group expects demand in 2018 to increase by 4 to 5 percent. However, de Juniac warned that the threat of protectionism, higher oil prices, and patchy economic growth could alter that forecast.

Growth in the Asia-Pacific region, the largest in terms of global freight share, barely budged in March, up 0.7 percent from 2017 levels. Europe, the second-biggest market, grew by 1 percent. North American demand rose 3.9 percent. Latin America was the strongest market in March, with its airlines posting a 15.5-percent year-over-year gain. Latin America represents 2.7 percent of the global market.