Cargo Chartbook – Q3 2017 1

CARGO CHARTBOOK Q3 2017 Freight demand stays strong into H2, alongside a rising yield trend

Annual growth in air freight tonne kilometres (FTKs) accelerated to 11.8% in the three months ended July.

Airline heads of cargo remain positive about the outlook over the year ahead, although indicators suggest that the current cyclical upturn in year-on-year FTK growth may be nearing a peak.

Rising cargo yields are helping to offset upward pressure on breakeven loads from increased input prices. Given the recent increase in freight loads and freighter utilization, this is supporting financial performance.

Market developments

Year-on-year industry-wide FTK growth accelerated

to 11.8% in the three months ended July – its fastest

pace since late-2010.

This acceleration was driven by a pick-up in the

contribution from North American airlines, helped by

further increases in FTKs flown across the Atlantic.

Freight traffic on all of the major international

markets is currently growing in the region of 10-15%

year-on-year.

Having slowed earlier in the year, the quarterly

seasonally adjusted (SA) pace of FTK growth

recovered to match the sort of pace seen in the

strong second half of 2016.

Market drivers

The global economic and trade backdrop has

remained supportive of air freight demand. World

trade volumes grew by 4.1% year-on-year in H1

2017 – the strongest start to a year since 2011.

Signs suggest that the cyclical upturn in FTK growth

may be nearing a peak – not least the fact that the

inventory-to-sales ratio has stopped falling.

However, business surveys remain consistent with

solid annual FTK growth of around 7.5% in Q3 2017.

Capacity, costs and yields

817 tonnes of additional payload capacity have

been added to the freighter fleet so far this year –

nearly half the amount that was added in the same

period of 2016. Almost eight times as much belly

payload capacity was added through wide-body

passenger deliveries, but even this was a 6% lower

than was added last year.

Cargo yields (including fuel and other surcharges)

rose by 7.9% year-on-year in July 2017 – its fastest

pace in more than six years. Rising cargo yields are

helping to offset upward pressure on breakeven

loads from increased input prices.

The ongoing upward trend in large freighter

utilization will help to lower unit costs further, and to

reinforce the backdrop for financial performance.

Survey respondents remain upbeat

When surveyed in early-July, airline heads of cargo

remained confident about the outlook for demand

over the year ahead. (See Chart 1.) Despite the

recent upward trend in cargo yields, our survey

respondents were slightly more balanced on the

outlook than they were in the previous survey.

Chart 1 – IATA survey of heads of cargo

Table 1 – Key data overview

David Oxley

economics@iata.org 18th September 2017

0

10

20

30

40

50

60

70

80

90

100

Jul 2

00

7

Jan

20

08

Jul 2

00

8

Jan

20

09

Jul 2

00

9

Jan

20

10

Jul 2

01

0

Jan

20

11

Jul 2

01

1

Jan

20

12

Jul 2

01

2

Jan

20

13

Jul 2

01

3

Jan

20

14

Jul 2

01

4

Jan

20

15

Jul 2

01

5

Jan

20

16

Jul 2

01

6

Jan

20

17

Jul 2

01

7

*Quarterly dataSource: IATA Economics

Weighted score (50 = no change)

Cargo volumes -next 12 months

Cargo yields -next 12 months

Key data overview - rolling 3 month periods

11.8% 3.8%

9.9% 4.4%

14.2% 3.8%

11.8% 3.5%

13.0% 4.0%

4.3% 0.4%

Tonnes %

Freighters 817 -48.0%

Belly 6,203 -6.0%

Level3 5-yr avg

52.8 50.8

1 3m ended Jul 20172 3m ended Jun 20173 Average of 3m ended Aug 2017

Rolling 3 month periods

(unless specified otherwise)

% quarter-

on-quarter

% year-

on-year

Industry-wide FTKs1

North America-Asia2

Asia-Europe2

Europe-North America2

Within Asia (int'l)2

World trade volumes1

Global PMI new export orders

Year-on-year changeAdditional widebody payload

capacity (Jan-Sept 2017)

Cargo Chartbook – Q3 2017 2

Market developments

1. Having moderated earlier in the year, the upward trend in

quarterly seasonally-adjusted air freight tonne kilometres

(FTKs) accelerated once again in the three months ended

July 2017.

2. The quarterly pace of growth matched that seen during the

middle of 2016. All told, year-on-year growth in FTKs

increased to 11.8% during the period – the fastest pace on

this 3-month rolling basis since 2010.

3. Carriers based in Europe and Asia Pacific made sizeable

contributions to annual growth in FTKs in the 3 months to

July. But the pick-up compared to the previous three month

period was driven largely by North American airlines.

4. The recent period of air freight outperformance relative to

wider goods trade has been consistent with the typical

pattern seen during upturns in the economic cycle, as firms

turn to the speed afforded by air freight to restock.

5. Traffic increased in seasonally-adjusted terms on all four

major segment-based trade lanes over the past three

months. Year-on-year FTK growth remained in the region of

10-15% in all cases.

6. Cargo throughput rose robustly at a number of key freight

airports in August 2017, particularly in Asia. Miami and the

Middle East airports remain the outliers, however, notably

Abu Dhabi.

44

46

48

50

52

54

56

58

60

62

Jan

'12

Ap

r'1

2

Jul'1

2

Oct

'12

Jan

'13

Ap

r'1

3

Jul'1

3

Oct

'13

Jan

'14

Ap

r'1

4

Jul'1

4

Oct

'14

Jan

'15

Ap

r'1

5

Jul'1

5

Oct

'15

Jan

'16

Ap

r'1

6

Jul'1

6

Oct

'16

Jan

'17

Ap

r'1

7

Jul'1

7

*Rolling 3 month periodsSources: IATA Economics, IATA Monthly Statistics

Industry-wide FTKs (billions per rolling 3m period)

Actual

Seasonally adjusted

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

Jan

'12

Ap

r'1

2

Jul'1

2

Oct

'12

Jan

'13

Ap

r'1

3

Jul'1

3

Oct

'13

Jan

'14

Ap

r'1

4

Jul'1

4

Oct

'14

Jan

'15

Ap

r'1

5

Jul'1

5

Oct

'15

Jan

'16

Ap

r'1

6

Jul'1

6

Oct

'16

Jan

'17

Ap

r'1

7

Jul'1

7

*Rolling 3 month periodsSources: IATA Economics, IATA Monthly Statistics

Industry-wide FTKs (% growth rate)

Quarter-on-quarter

Year-on-year

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

Jan

'12

Ap

r'1

2

Jul'1

2

Oct

'12

Jan

'13

Ap

r'1

3

Jul'1

3

Oct

'13

Jan

'14

Ap

r'1

4

Jul'1

4

Oct

'14

Jan

'15

Ap

r'1

5

Jul'1

5

Oct

'15

Jan

'16

Ap

r'1

6

Jul'1

6

Oct

'16

Jan

'17

Ap

r'1

7

Jul'1

7

Africa Latin AmericaMiddle East North AmericaEurope Asia PacificIndustry total

Sources: IATA Economics, IATA Monthly Statistics

Contributions to industry FTK growth (percentage points, by region of registration)

*Rolling 3 month periods

90

95

100

105

110

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

*Rolling 3 month periodsSources: IATA Economics, IATA Monthly Statistics

Ratio of industry FTKs to world trade volumes

Increasing FTK share

60

70

80

90

100

110

120

130Indices (SA, 3m ended Jan 2012 =100)

Global FTKs

World trade volumes

3

4

5

6

7

8

9

10

11

Jun

'12

Dec

'12

Jun

'13

Dec

'13

Jun

'14

Dec

'14

Jun

'15

Dec

'15

Jun

'16

Dec

'16

Jun

'17

Sources: IATA Economics, IATA Monthly Statistics route

Int'l FTK by route (segment-basis, billion)

Europe-Asia

Asia - North America

Europe - North America

Within Asia

-15%

-10%

-5%

0%

5%

10%

15%

20%

Jun

'12

Dec

'12

Jun

'13

Dec

'13

Jun

'14

Dec

'14

Jun

'15

Dec

'15

Jun

'16

Dec

'16

Jun

'17

*Rolling 3 month periods

(% year-on-year)

US west coast seaport

disruption

-5.9%

0.1%

5.0%

5.5%

8.0%

9.6%

11.0%

11.2%

11.6%

13.9%

-10% -5% 0% 5% 10% 15% 20%

Abu Dhabi (AUH)**

Miami (MIA)*

Dubai (DXB)*

Frankfurt (FRA)

Tokyo (NRT)*

Seoul (ICN)

Hong Kong (HKG)*

Singapore (SIN)*

Los Angeles (LAX)*

Shanghai (PVG)

Source: Individual airport websites

Tonnes of cargo throughput (% year-on-year, Aug 2017 unless specified)

*Jul 2017**Jun 2017

Cargo Chartbook – Q3 2017 3

Market drivers

7. Global business confidence has largely tracked sideways

since late-2016. Nonetheless, confidence remains above its

five-year average and picked up in August, particularly in so-

called emerging markets.

8. Having risen strongly since early-2016, consumer

confidence in particular has remained strong. This pick-up is

translating into stronger consumer spending and is helping to

support demand for air freighted goods.

9. The trade backdrop has also improved: world trade

volumes grew by 4.1% year-on-year in H1 2017 – the

strongest start to a year since 2011. This was driven by a

5.9% increase in emerging market trade.

10. The rising trend in the new export orders component of

the global PMI paused during H1 2017. Nonetheless,

exporters’ order books remain robust, and the measure is

consistent with year-on-year FTK growth of 7.4% in Q4 2017.

11. The traditional demand drivers of air freight volumes have

also been strong so far in 2016. The quantity of silicon

material shipments increased by 10.1% year-on-year in Q2

2017 – almost double its five-year average growth rate.

12. The recent fall in the (US) inventory-sales ratio has also

helped to drive the pick-up in FTK growth. That said, the ratio

has now stopped falling, and suggests that the annual

industry-wide FTK growth rate may be nearing a peak.

48

49

50

51

52

53

54

55

56

57

2012 2013 2014 2015 2016 2017

Global

Advanced markets

Sources: IATA Economics, Markit

Composite PMIs (50 = no change)

*Monthly data

Emerging markets98.5

99.0

99.5

100.0

100.5

101.0

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

2012 2013 2014 2015 2016 2017*Monthly dataSources: IATA Monthly Statistics, Thomson Reuters Datastream

% year-on-year

Consumer confidence (RHS, OECD + 6 major emerging economies*)

Industry FTK growth (LHS, 3m MA)

Long-run average = 100

*Brazil, Russia, India, China, Indonesia, and South Africa

85

90

95

100

105

110

115

120

Industrialproduction

Trade volumes

Indices (SA, 3m ended Mar 2012 = 100)

Advanced economies

85

90

95

100

105

110

115

120Emerging economies

94

96

98

100

102

104

106

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

Sources: IATA Economics, CPB

94

96

98

100

102

104

106

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

*Rolling 3 month periods

Ratio of trade volumes to industrial production

Latest PMI outcomes consistent with year-on-year FTK growth of 7.4% in Q4 2017

R² = 0.8468

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

-20 -15 -10 -5 0 5 10 15 20 25

*Quarterly dataSources: IATA Economics, IATA Monthly Statistics, Markit

Industry FTKs (% year-on-year)

Year-on-year change in global man. PMI new export orders (adv. 1 quarter)

-80%

-60%

-40%

-20%

0%

20%

40%

60%

80%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

Global FTKs (LHS)

Silicon material shipments (RHS)

Sources: IATA Economics, IATA Monthly Statistics, SEMI

% year-on-year % year-on-year

*Quarterly data

-0.15

-0.10

-0.05

0.00

0.05

0.10

0.15-30%

-20%

-10%

0%

10%

20%

30%

40%

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

Global FTKs (LHS)

US Inventory-to-sales ratio (RHS, inverted scale)

Sources: IATA Economics, IATA Monthly Statistics

% year-on-year Year-on-year change in level

*Rolling 3 month periods

Fall in inventory to sales ratio, increase

in FTK growth

Implied path if the inventory-to-sales ratio simply remains

flat at its July 2017 level

Cargo Chartbook – Q3 2017 4

Capacity, costs, and yields

Further details about the IATA statistics in this publication can be found here.

13. 817 tonnes of capacity have been added to the freighter

fleet so far this year – almost half the amount added in the

same period of 2016. Additional payload from widebody belly

capacity has continued to exceed freighter-only additions.

14. Large widebody freighter aircraft increased throughout

the first half of 2017, taking it back to levels last seen in late-

2015. The pick-up in utilization has come alongside a

recovery in the freight load factor from its early-2016 lows.

15. Brent oil prices recently rose to a five-month high around

US$54/bbl, driven in part by a weaker US dollar. Oil price

futures are consistent with prices remaining broadly in line

with current levels over the coming years.

16. The recovery in the freight load factor has helped to

underpin a recovery in cargo yields. The cargo yield including

fuel and other surcharges rose by 7.9% year-on-year in July

– its fastest annual pace since late-2010.

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017Sources: IATA Economics, Ascend

TonnesWidebody payload capacity added each year to date (deliveries made between 1 January and 13 September):

BellyFreighter

41%

42%

43%

44%

45%

46%

47%

9.5

10.0

10.5

11.0

11.5

2012 2013 2014 2015 2016 2017*Monthly dataSources: Boeing, IATA Monthly Statistics

Average flight hours per day

Large widebody freighter aircraft utilization (LHS)

% of AFTKs (SA)

Industry-wide freight load factor (RHS)

20

40

60

80

100

120

140

160

2012 2013 2014 2015 2016 2017Sources: Platts, Thomson Reuters Datastream

Jet fuel

Brent crude oil

US$/bbl

*Monthly data

39%

40%

41%

42%

43%

44%

45%

46%

47%

1.0

1.2

1.4

1.6

1.8

2.0

2.2

2.4

2.6

2012 2013 2014 2015 2016 2017*Monthly dataSource: IATA CASS, IATA Monthly Statistics

US$ per kilo

Global air freight yield (LHS, incl. fuel and other surcharges)

Global air freight yield excl. fuel and other surcharges (LHS)

% of AFTKs (SA)

Industry-wide freight load factor (RHS)

Dotted lines are seasonally adjusted

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