The latest report from the International Air Transport Association (IATA), the global trade union for airlines, shows that air traffic demand continues to rise in May. For a continent that exports primary products, this should give leverage to the cargo strategy of airports in Africa. Moreso, says the report, airlines registered in Africa and Asia Pacific led with the highest annual growth rates in international Cargo Tonne Kilometres (CTK), which measures a metric tonne of freight carried one kilometre, with 18.2 percent and 18.1 percent, respectively. For African carriers, the figure increased by 7.2 percentage points (ppts) compared to April, the highest increase among all carriers.
The month of May, the report states, brought the sixth month in a row of demand growing by double digits. The increase in demand year- over- year ( YOY) was 14.7 percent in May and +5.34 percent in the same month which marked the sixth consecutive month of double digit annual growth. Air cargo traffic, capacity and revenues continued to recover in late 2023.
According to IATA, world air cargo traffic expanded 8.3 percent year-over-year, as measured in cargo tonne-kilometres (CTKs), in November 2023, the best month for industry traffic growth since December 2021. After 17 months of consecutive decline, traffic tepidly began growing again in August 2023, and has grown every month since then.
Carriers from Asia Pacific and Europe which together contributed roughly two thirds to the increase, were the largest contributors to this strong annual rise in May. Market strength is reported to be concentrated in the Asia Pacific and Middle East, both in terms of region of airline domicile and region-to-region international flows. According to IATA data, Europe to/from Far East and Middle East-centric traffic markets are leading the traffic recovery. Collectively, all major international air trade lanes are improving, but the intra-Far East, trans-Atlantic and trans-Pacific markets were reportedly recovering more slowly at the beginning of the year.
As economies recover from the pandemic, demand for goods has increased and so, there is higher cargo traffic. This attests to the fact that global trade has shown resilience despite challenges posed by the pandemic. The strength of the air cargo traffic recovery has been reported to be based on the capacity recovery on long-haul trade lanes in the post-Covid era.
The surge in online shopping as a result of the boom in e-commerce has contributed to the rise in demand for air cargo. Efficient logistics is the backbone of e-commerce. The speed and reliability needed for cross border shipments is best achieved by air transport. The air cargo traffic recovery is reported to have begun mid-year 2023, driven by air exports of e-commerce shipments to primarily Europe, followed by North America.
When sea routes are congested, or there are disruptions to transport by sea or where maritime shipping faces capacity constraints and delays, businesses will give serious consideration to air freight. Air cargo offers a faster alternative when businesses face this challenge. For instance, the closure of Russian and Ukrainian air space due to the Russian invasion of Ukraine, as well as the slow restoration of China domiciled airline belly capacity, have been reported to have contributed to a higher-than-normal reliance on freighter capacity in those two major east-west markets. So, this situation has helped to keep air cargo yields much higher than their pre-Covid levels.
Now, this will also inform the strategy of African airports as they seek to move goods across regions, intra-states, and amongst African states. With security challenges, an opportunity does seem to beckon for airlines to possibly break-even in regions where passenger traffic may not give the needed numbers but cargo may, if explored.
Experts have advised cautious optimism in the face of rising traffic. While the major international region-to-region markets have seen year-to-date capacity restoration of roughly 7% or greater, the capacity growth on the transpacific air trade lane had reportedly slowed dramatically in recent months prior to the beginning of the year. Where there is a continued slow recovery in capacity on trans-Pacific air trade lanes, that may slow the ongoing recovery in traffic volumes, experts have stated.
Air cargo rates may be another headwind to contend with, experts believe. Given the turmoil in air cargo over the past four-plus years, overall world air cargo rates reportedly remain nearly 40 percent higher than their late 2019 levels. There were expert reports that as a result of the surge in e-commerce outbound from Asia, and, mostly China to Europe, air cargo rates for seven major markets were 55 percent higher than pre-Covid levels.
While the latter 2023 pick-up in air cargo traffic due to e-commerce is cause for optimism, the historic driver of air cargo growth, industrial activity, remains a challenge not to be overlooked. This missing air cargo growth driver was a cause for concern at the beginning of the year. However, IATA reports that the latest figure for industrial production, a measure of the output generated by industrial sectors such as mining, manufacturing, and utilities, recorded a small 0.5 percent rise over the previous month of April. And, meanwhile, the global manufacturing output PMI also continued to point to expansion in May with 52.6 points. This marked the fifth consecutive expansion and the highest figure since January 2022. So, there is hope on the horizon for air cargo.
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