Global demand for air cargo dropped significantly in January, according to data published by the International Air Transport Association (IATA) last week. The data reflects the impact of several economic factors on the cargo industry in recent months. Let’s take a closer look.
Capacity on the rise, demand declining
Photo: American Airlines
According to IATA, air cargo capacity increased 3.9% between January 2022 and January 2023. In contrast, demand decreased 14.9%.
The increase in capacity can be attributed to the fact that passenger airlines have finally made a complete recovery and resumed flights at pre-pandemic levels after three tumultuous years. Given that passenger airlines are responsible for carrying around half of the world’s cargo, this translates to a significant increase in cargo capacity.
Meanwhile, the decrease in demand can be explained by a number of factors that continue to have a negative impact on global economic conditions. In particular, the war in Ukraine and the accompanying sanctions imposed by the European Union on the Russian government have resulted in a significant reduction in exports to and from the country. In addition, rampant inflation has driven up the price of goods and limited the purchasing power that trade partners are able to exercise. Finally, labor shortages have severely hindered manufacturing and transportation capabilities across industries.
Fortunately, there is a light at the end of the tunnel. According to IATA’s Director General Willie Walsh,
“There is solid ground for some cautious optimism about air cargo. Yields remain higher than pre-pandemic. And China’s much faster than expected shift from its zero COVID policy is stabilizing production conditions in air cargo’s largest source market. That will give a much-needed demand boost as companies increase their engagement with China.”
Breaking it down by region
Photo: FedEx
The following table summarizes the growth of the air cargo industry over the course of the past year by region:
|
Share of demand in 2022 |
Change in demand from 2022 to 2023 |
Change in capacity from 2022 to 2023 |
|
|
Total market |
100.0% |
-14.9% |
-3.9% |
|
Africa |
2.0% |
-9.5% |
-1.8% |
|
Asia Pacific |
32.4% |
-19.0% |
8.8% |
|
Europe |
21.8% |
-20.4% |
-9.3% |
|
Latin America |
2.7% |
4.6% |
34.4% |
|
Middle East |
13.0% |
-11.8% |
9.6% |
|
North America |
28.1% |
-8.7% |
-2.3% |
Cargo demand was hit hardest in Europe, where it dropped 20.4% over the course of the past year. As mentioned previously, this was likely the result of sanctions imposed by the European Union on the Russian government as part of the ongoing war in Ukraine. The only region where demand increased was in Latin America (4.6%).
Cargo capacity, on the other hand, dropped most sharply in Europe (9.3%) and increased most significantly in Latin America (34.4%).
What do you think is the future of the air cargo industry? Do you expect that the current market is reflective of a long-term trend or simply a bump in the road? Let us know in the comment section.
Source: IATA