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Air Freight Demand Sees A Glimmer of Hope Amidst Global Economic Challenges

The air freight industry has been on a roller-coaster ride in the rapidly changing global trade dynamics. Recent data released by the International Air Transport Association (IATA) provides an in-depth look into the prevailing trends and what they might spell for the future.

Air Freight Demand Inches Closer to Previous Year's Levels
Finnair Cargo Loading/Finnair

Air Freight Demand Inches Closer to Previous Year’s Levels

July 2023 has presented a mix of optimism and caution in the air cargo market. Despite the challenges, the month’s global air cargo demand was a mere 0.8% below the levels recorded in July 2022. Considering this against the backdrop of an alarming 3.4% dip just a month earlier, the figures are somewhat reassuring.

Key Statistics From July 2023:

  • Growth Trend: The global demand, quantified in cargo tonne-kilometers (CTKs), registered a decline of 0.8% from July 2022. The international operations marked an even narrower gap at -0.4%.
  • Boost in Capacity: Notably, the capacity saw an 11.2% upsurge when matched against July 2022. This surge can be attributed to a 29.3% YoY growth in belly capacity, a direct result of the summer season effect.

Analyzing the Operating Landscape

A closer look at the operating environment in July reveals:

  1. A decline in Global Manufacturing: The manufacturing output PMI and the new export orders PMI slipped below the crucial 50 benchmark, signaling a contraction in worldwide manufacturing and exports.
  2. Global Trade Trends: For the third consecutive month in June, global cross-border trade dipped by 2.5% YoY. This decline mirrors the broader economic challenges and the reduced demand. However, the difference between the annual growth rates of air cargo and global goods trade has shrunk to its smallest gap since January 2022.
  3. Supply Chain Dynamics: The global supplier delivery time PMI stood at 51.9, indicating fewer hiccups in supply chains. Only China registered a PMI below 50 among the global economies, while the US, Europe, and Japan saw positive figures.
  4. Inflation Trends: Inflation in July painted a mixed canvas. The US experienced an uptick in consumer prices for the first time in over a year. Conversely, China’s consumer and producer prices declined, signaling potential deflationary pressures.

Looking Ahead

IATA’s Director General Willie Walsh remarked, “Many fundamental drivers of air cargo demand, such as trade volumes and export orders, remain weak or are deteriorating. And there are growing concerns over how China’s economy is developing. At the same time, we are seeing shorter delivery times, which is normally a sign of increasing economic activity. Amid these mixed signals, strengthening demand gives us good reason to be cautiously optimistic.”

The trajectory of air freight demand showcases the interplay of multiple global factors. Understanding these nuances becomes pivotal for businesses and investors alike as the economic landscape keeps evolving.

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