Air cargo struggles due to trade war, Hong Kong disruptions

Dive Brief:

Air cargo volumes in July, measured in freight ton kilometers (FTK), were 3.2% lower than the same month a year earlier. This was the ninth straight month of negative year-over-year (YoY) growth, according to the International Air Transport Association.
Despite falling demand, capacity keeps going up, increasing 2.6% YoY in July.
IATA expects these trends to continue in August as a result of disruptions at the Hong Kong International Airport and new tariff increases in the trade war between the U.S. and China.

Dive Insight:

"Trade tensions are weighing heavily on the entire air cargo industry," IATA's Director General and CEO Alexandre de Juniac said in a statement. "Higher tariffs are disrupting not only transpacific supply chains but also worldwide trade lanes."

If these trends continue then 2019 could be the first year since 2009 when the global air freight market contracts, IATA said.

The Asia Pacific air cargo market has been hit especially hard by these declines as it makes up about 35% of global volume. Asia Pacific airlines are reporting FTKs 5.7% lower than a year earlier, according to IATA.

Africa was one region that showed growth in July with international FTKs growing11.3% YoY as it increases trade with the other regions, including the Asia Pacific.

Air cargo carriers are beginning to feel the effects of sluggish demand. FedEx announced plans last week to retire or ground up to 37 planes after peak season in an attempt to better match capacity with demand. Executives on FedEx's recent earnings call said manufacturing output has declined in Asia and Europe, weakening demand for air freight. FedEx expects this to continue into 2020.

UPS, meanwhile, said in July it is planning to increase its capacity. The air carrier said it had seen YoY growth in international air freight profit despite lower tonnage numbers, UPS CFO Richard Peretz said in July.

Early data from August suggests IATA is right about the trend continuing. Cathay Pacific saw its cargo traffic decline 11.6% YoY in August, according to Air Cargo World. Cathay Pacific was impacted by multiple days of disruptions caused by protests at the Hong Kong International Airport in August.