The International Air Transport Association (IATA) released data for global air freight markets showing that demand, measured in freight tonne kilometers (FTKs), grew by 10.4% in the first-half of 2017 compared to the first-half of 2016.

This was the strongest first half-year performance since air cargo’s rebound from the Global Financial Crisis in 2010 and nearly triple the industry’s average growth rate of 3.9% over the last five years. 

Freight capacity, measured in available freight tonne kilometers (AFTKs), grew by 3.6% in the first half of 2017 compared to the same period in 2016. Demand growth continues to significantly outstrip capacity growth, which is positive for yields.

Air cargo’s strong performance in the first half of 2017 was confirmed by June’s results. Year-on-year demand growth in June increased 11% compared to the same year-earlier period. Freight capacity grew by 5.2% year-on-year in June.

The sustained growth of air freight demand is consistent with an improvement in global trade, with new global export orders remaining close to a six-year high. However, there are some signs that the cyclical growth period may have peaked. The global inventory-to-sales ratio has stopped falling. This indicates that the period when companies look to restock inventories quickly, which often gives air cargo a boost, may be nearing an end. Regardless of these developments, the outlook for air freight is optimistic with demand expected to grow at a robust rate of 8% during the third quarter of this year.

“Air cargo is flying high on the back of a stronger global economy. Demand is growing at a faster pace than at any time since the Global Financial Crisis. That’s great news after many years of stagnation. And, even more importantly, the industry is taking advantage of this momentum to accelerate much-needed process modernization and improve the value it provides to its many customers,” said Alexandre de Juniac, IATA’s Director General and CEO.  

June 2017 (% year-on-year)	World share1	FTK	AFTK	FLF (%-PT)​2	FLF (level)​3
Total Market	100.0%	11.0%	5.2%	2.4%	45.0%
Africa	1.6%	31.6%	7.6%	4.8%	26.5%
Asia Pacific	37.5%	10.1%	7.8%	1.1%	55.5%
Europe	23.5%	14.3%	6.1%	3.3%	45.9%
Latin America	2.8%	9.8%	2.9%	2.1%	33.5%
Middle East	13.9%	3.7%	2.2%	0.6%	44.4%
North America	20.7%	12.7%	3.0%	3.1%	36.2%

Regional Performance

All regions experienced positive freight growth in the first half of 2017. Carriers in Asia Pacific and Europe accounted for two-thirds of the increase in demand. 

• Asia-Pacific airlines’ freight volumes grew 10.1% in June 2017 compared to the same period in 2016 and capacity grew by 7.8%. This contributed to a growth in freight demand of 10.1% in the first half of 2017 compared to the first half of 2016. Seasonally adjusted international freight volumes are now 4% above the level reached in 2010 following the global financial crisis bounce-back. Demand growth has been strongest, between 13-15%, on international routes within Asia as well as between Asia and Europe. Capacity in the region increased 4.8% in the first half of 2017. 

• North American carriers saw freight demand increase by 12.7% in June 2017 year-on-year and capacity increase by 3%. This contributed to strong growth in demand in the first half of 2017 of 9.3% in contrast to the negative growth seen during the same period in 2016. Capacity grew by 1.5% in the first half of 2017. Seasonally adjusted international volumes remain very strong, surging by an annualized rate of more than 30% in the second quarter. The strength of the US dollar continues to boost the inbound freight market but is keeping the export market under pressure.

• European airlines posted a 14.3% year-on-year increase in freight demand in June 2017 and a capacity rise of 6.1%. The healthy results helped boost cargo volumes for the first half of 2017 by 13.6%. The ongoing weakness of the Euro persists in boosting the performance of the European freight market which continues to benefit from strong export orders. Capacity in the region increased by 5.4% in the first half of 2017.

• Middle Eastern carriers’ freight volumes increased 3.7% year-on-year in June 2017 and capacity increased 2.2%. This contributed to an increase in demand in the first half of 2017 of 7.6%, well below the 10.8% average annual rate seen over the past five years. The slowdown in growth is mainly due to strong competition from carriers in other regions particularly on the Asia-Europe route rather than a significant decrease in demand which has continued to trend upwards at a solid rate of around 10% in annualized terms since early 2017. For the first time in 17 years the region’s share of total international freight flown in the first half of 2017 has fallen. Capacity in the region increased by 1.5% in the first half of 2017.

• Latin American airlines experienced a growth in demand of 9.8% in June 2017 compared to the same period in 2016 – the fastest since November 2010 – and an increase in capacity of 2.9%. June’s positive results contributed to the region posting a marginal increase in demand of 0.3% for the first half of 2017. However, seasonally adjusted international volumes remain 10% lower than at the peak in 2014. Capacity fell by 0.6% in the first half of 2017. The region continues to be blighted by weak economic and political conditions, particularly in its largest economy, Brazil.

• African carriers had the fastest growth in year-on-year freight volumes, up 31.6% in June 2017 and a capacity increase of 7.6%. This contributed to freight demand growing 25.9% in the first half of 2017 – the fastest of all regions. Demand has been boosted by very strong growth on the trade lanes to and from Asia which have increased by nearly 60% in the first five months of 2017. Capacity grew 11.2% in the first half of the year. Seasonally adjusted growth has levelled off in recent months; however growth is set to remain in double digits for the remainder of 2017.

---

Air passenger traffic: Strong demand growth resumes in June

The International Air Transport Association (IATA) announced global passenger traffic data for June showing that demand (measured in total revenue passenger kilometers or RPKs) rose by 7.8% compared to the year-ago period. This was in line with the 7.7% growth recorded in May. All regions reported growth. June capacity (available seat kilometers or ASKs) increased by 6.5%, and load factor rose 1.0 percentage point to 81.9%.

For the first six months of 2017, the industry experienced a 12-year high in traffic growth (7.9%) and a record first half load factor of 80.7%.

“A brighter economic picture and lower airfares are keeping demand for travel strong. But as costs rise, this stimulus of lower fares is likely to fade. And uncertainties such as Brexit need to be watched carefully. Nonetheless, we still expect 2017 to see above-trend growth,” said Alexandre de Juniac, IATA’s Director General and CEO.

June 2017 (% year-on-year)	World share1	RPK	ASK	PLF (%-PT)​2	PLF (level)​3
Total Market	100.0%	7.8%	6.5%	1.0​%	81.9%
Africa	2.2%	9.2%	6.6%	​1.6%	64.8%
Asia Pacific	32.8%	11.6%	9.4%	1.6%	​80.9%
Europe	26.5​%	8.8%	6.7%	1.7%	85.4%
Latin America	5.2%	​6.7%	5.2%	​1.2%	​81.6%
Middle East	​​9.6%	2.1%	3.3%	​-0.8%	​68.8%
North America	23.7%	4.0%	4.1​%	​0.0%	86.3​%

International Passenger Markets

June international passenger demand rose 7.5% compared to June 2016. All regions recorded growth, led by airlines in Africa. Capacity climbed 6.2%, and load factor climbed 1.0 percentage point to 80.6%.

• Asia-Pacific airlines’ June traffic jumped 9.1% compared to the year-ago period. Capacity rose 7.9% and load factor edged up 0.9 percentage points to 79.3%.The overall upward trend in seasonally-adjusted traffic remains strong, although volumes have slipped in recent months. Traffic on Asia-Europe routes continues to trend upwards following terrorism related disruptions in early 2016. However, solid demand growth on international routes within Asia has paused.

• European carriers saw traffic rise 8.8% in June compared to June 2016, which was up from a 7.5% year-over-year increase recorded in May. Capacity climbed 6.5% and load factor rose 1.8% percentage points to 85.9%, highest among the regions. The stronger growth reflects both a favorable comparison with the year-ago period, as well as increased momentum in the regional economic backdrop.

• Middle Eastern carriers posted a 2.5% traffic increase in June, which was a slowdown from the already subdued 3.7% growth seen in May. Capacity rose 3.1%, and load factor slipped down 0.4 percentage points to 68.9%. While most markets have seen demand slowing, it is most visible on the Middle East-North America market, which has been affected by a combination of factors including the (recently-lifted) ban on personal electronic devices, as well as a wider negative stimulation from the travel ban that has now been implemented for certain countries. However, passenger traffic between the Middle East and North America was already slowing in early 2017, in line with a moderation in the pace of growth of the largest carriers in the region.

• North American airlines’ demand rose 4.4% compared to June a year ago. Capacity climbed 4.1%, with load factor inching up 0.3 percentage points to 84.5%. The comparatively robust economic backdrop in North America is expected to continue to support outbound passenger demand. However, anecdotal evidence suggests that inbound tourism is being deterred by the additional security measures in place for travel to the US.

• Latin American airlines experienced a 9.7% rise in demand compared to the same month last year supported by strong travel within the region, while travel to North America is flat to down slightly. Capacity increased by 9.1% and load factor rose 0.4 percentage points to 82.1%.

• African airlines’ traffic soared 9.9% in June. Capacity rose 7.1%, and load factor jumped 1.7 percentage points to 64.3%, although this still was the lowest among regions. Conditions in the region’s two largest economies have continued to diverge, with business confidence in Nigeria rising sharply in recent months, while South Africa’s economy fell into recession in the first quarter.

Domestic Passenger Markets

Demand for domestic travel climbed 8.2% in June compared to June 2016, up slightly from the 7.9% growth seen in May. June capacity increased 7.0%, and load factor rose 0.9 percentage points to 84.3%. Led by China and India, all markets reported demand increases, but with wide variation.

June 2017 (% year-on-year)	World share1	RPK	ASK	PLF (%-PT)​2	PLF (level)​3
International	63.7%	7.5%	6.2%	1.0​%	80.6%
Africa	1.9%	9.9%	7.1%	1.7%	64.3%
Asia Pacific	18.1%	9.1%	7.9%	​0.9%	​79.3%
Europe	23.7​%	8.8%	6.5%	1.8%	85.9%
Latin America	2.7%	​9.7%	9.1%	0.4%	​82.1%
Middle East	​​9.3%	2.5%	3.1%	​-0.4%	68.9%
North America	8.0%	4.4%	4.1​%	0.3%	84.5​%

• India led all markets with a 20.3% rise in domestic traffic in June. However, the very strong upward trend in traffic has slowed since the country’s unexpected ‘demonetization’ in November 2016. India’s streak of year-on-year double-digit traffic growth may have ended with June.

• China’s domestic traffic surged 17.6% in June, which was ahead of the first half growth rate of 15.2%. There continues to be little sign of any slowdown in the traffic trend and second quarter GDP figures were stronger than expected. Air travel demand is continuing to be stimulated by supply factors, including ongoing growth in the number of unique airport-pair routes served, which ultimately translates into time savings for passengers.

The Bottom Line: Air travel recorded its fastest first-half growth in 12 years, pushing load factors to record highs. And the peak northern summer travel season is likely to be record-breaking.

“This is all good news. The demand for travel is strong and that, in turn, will make a positive contribution to the global economy. This growth will also further expose infrastructure deficiencies. In every part of the world airport and air navigation infrastructure is struggling to cope with demand. There are plenty of examples linking connectivity and economic prosperity. But few governments have been able to deliver on the imperatives of sufficient capacity, quality aligned with user needs and affordability. This year’s strong growth is a reminder that there is no time to lose,” said de Juniac.

---

[1] % of industry FTKs in 2016

[2] Year-on-year change in load factor

[3] Load factor level