Demand for global air freight capacity is sinking under the weight of the spiraling trade war between the U.S. and China, according to the latest figures from The International Air Transport Association (IATA).
The demand for global air freight contracted by 3.2% in July 2019 compared to the same period in 2018, IATA found. As measured in freight tonne kilometers (FTKs), this marks the ninth consecutive month of year-on-year decline in freight volumes.
Without enough demand, the industry is now swimming in extra capacity. IATA's numbers show that freight capacity rose by 2.6% year-on-year in July 2019. As measured in available freight tonne kilometers (AFTKs), capacity growth has now outstripped demand growth for the ninth consecutive month.
Economic statistics show a clear culprit for the demand slump and the capacity glut. According to IATA, air cargo continues to suffer from weak global trade and the intensifying trade dispute between the U.S. and China. Global trade volumes overall are 1.4% lower than a year ago, and trade volumes between the U.S. and China are even worse, falling by 14% year-to-date compared to the same period in 2018.
"Trade tensions are weighing heavily on the entire air cargo industry. Higher tariffs are disrupting not only transpacific supply chains but also worldwide trade lanes," Alexandre de Juniac, IATA's Director General and CEO, said in a release. "While current tensions might yield short-term political gains, they could lead to long-term negative changes for consumers and the global economy. Trade generates prosperity. It is critical that the U.S. and China work quickly to resolve their differences."
Specific regions of the globe showed variations from the overall average, IATA found. Airlines in Asia-Pacific and the Middle East suffered sharp declines in year-on-year growth in total air freight volumes in July 2019, while North America and Europe experienced more moderate declines. Africa and Latin America both recorded growth in air freight demand compared to July last year.
However, the sputtering global economy as a whole shows no signs of rebounding from its condition. For the first time since February 2009, all major trading nations reported falling orders. And the global Purchasing Managers Index (PMI) has pointed to falling orders for new manufacturing exports since September 2018, IATA said.
