Growth in trade and e-commerce continue to boost global air travel

Global air freight continues to soar, fueled by trade growth, e-commerce growth and capacity constraints in ocean freight. The latest data from the International Air Transport Association (IATA) reveals that air cargo markets around the world have maintained double-digit year-over-year growth this year. Total demand, measured in cargo tonne-kilometres (CTK), increased by 14.7% compared to May 2023 levels (15.5% for international operations). This is the sixth consecutive month of double-digit year-over-year growth, IATA noted. Capacity, measured in available cargo tonne-kilometres (ACTK), increased by 6.7% compared to May 2023 (10.2% for international operations). IATA noted that air cargo demand rose sharply in May across all regions. The sector benefited from growth in trade, booming e-commerce and capacity constraints in ocean freight. Middle Eastern carriers reported a 15.3% year-on-year increase in air cargo demand in May. The Middle East-Europe market performed particularly well, with a year-on-year increase of 33.8%, outpacing the Middle East-Asia market, which grew by 18.6% year-on-year. Capacity in May increased by 2.7% year-on-year. Asia-Pacific airlines reported a 17.8% year-on-year increase in air cargo demand in May. Demand in the Africa-Asia trade lane increased by 40.6% year-on-year, while demand in the Europe-Asia, intra-Asia and Middle East-Asia trade lanes increased by 20.4%, 19.2% and 18.6%, respectively. Capacity increased by 8.4% year-on-year. The growth in trade is clearly reflected in the latest industrial production data, a measure of the performance generated by industrial sectors such as mining, manufacturing and utilities, which posted a modest 0.5% increase compared to the previous month. Compared to 2023, the indicator indicated an expansion at an annual growth rate of 2.7%, continuing the moderate growth trend seen in recent years, which is also in line with pre-pandemic trends (2012-2019). Global cross-border trade in goods also showed expansion on both a monthly and annual basis in April, with readings of 1.5% and 1.8%, respectively. Notably, April brought the second month of positive annual growth in 2024 after February. This is an encouraging sign in a tense business environment that continues to be affected by inflation, weakened supply chains, geopolitical tensions and increasing restrictions on cross-border trade. The Purchasing Managers’ Index (PMI) measures economic trends in the manufacturing and services sectors. For example, a PMI above 50 suggests that more purchasing managers expect their business to grow compared to the previous month, while a value below 50 indicates fewer managers with that outlook. In particular, the Industrial Production PMI and New Export Orders are two leading indicators of global demand for air freight. The New Export Orders PMI, an indicator that can be understood as a measure of the perceived prosperity of international trade, signaled expansion in May with a reading of 50.4 (down from 50.5 in April). IATA noted that this is the second positive reading after the global index crossed the critical 50-point benchmark for the first time in more than two years in April. This is an encouraging sign that is consistent with the evolution of global goods trade discussed earlier (in April). On the regional front, China and the US continued to have optimistic expectations for new export orders last month, as they have for most of 2024. On the other hand, readings in Europe and Japan maintained their recessionary signals, although Europe showed the smallest decline since early 2022. IATA Director General Willie Walsh noted: “Air cargo demand rose sharply in May across all regions. The sector benefited from trade growth, booming e-commerce and capacity constraints in shipping. The outlook remains broadly positive, with purchasing managers showing expectations for future growth.” However, some weakening could come as the US imposes stricter conditions on e-commerce shipments from China. Rising costs and transit times for shipments below $800 could discourage US consumers and pose a significant challenge to growth in the Asia-North America trade lane, the world’s largest.” Pratap John is the business editor at Gulf Times. Twitter handle: @PratapJohn