IATA has released the latest quarterly cargo market analysis.

Key points:

• Industry wide FTKs grew 3.8 percent in 2016, the second highest growth rate since the 2010 rebound after the GFC
• Global economic growth is expected to accelerate moderately in 2017, however world trade remains fragile
• But expansion in export orders and strong consumer confidence may boost air cargo demand
• Air cargo profitability outlook under strain due to flooding-in of capacity and rising fuel costs

Economic outlook and  traffic performance

Industry wide FTKs grew 3.8 percent in 2016, the second highest annual growth rate since the 2010 rebound after the GFC. This solid growth in air cargo demand occurred despite a moderate deceleration in the growth rate of the global economy in 2016 and is explained by favorable cyclical and structural factors. In 2017, the global economy is expected to accelerate moderately, as fiscal policies ease.

However, there is significant uncertainty on the scale and timing of the stimulative policy interventions in the US and the extent to which impacts of the planned tax reform, infrastructure spending and regulatory overhaul will materialize in 2017. Irrespective of this uncertainty prospects for the US economy remain favorable with strong household spending, jobs growth and continued signs of rising nominal wages. However, a strong US dollar may be a drag on exports and impacts of US posture vis-à-vis trade policy are unclear. Expected increases in the US Federal Funds Rate may expose vulnerabilities among some emerging markets although pick-up in growth in emerging markets is still to be expected.

Growth in the Eurozone has been a key driver underpinning the favorable demand for air cargo in 2016. The decelerating aggregate growth figures for 2016 mask the acceleration in growth that has been experienced across a number of Eurozone states. The broadening of the economic recovery in the Eurozone offered a key favorable tailwind for air cargo demand in 2016 and if sustained could do so again in 2017.

In sum, the air cargo market had a weak first quarter but recovered and grew in the second and third. Growth accelerated further in the fourth quarter supported by a pick-up in Asia and a more intense peak season, as global product launches (i.e. Apple) and new marketing strategies (i.e. singles day, Cyber Monday) contributed to shoring up demand. One-off factors (i.e. Hanjin Shipping bankruptcy) may have also diverted some cargo flows temporarily to air thereby boosting demand.

European and Asian carriers’ FTKs explain about 61 percent of growth seen in Q4 and about 64 percent of the growth in 2016. Middle East and North American carriers accounted for 24 percent and 11 percent respectively of traffic growth in 2016.