The International Air Transport Association (IATA) released data for November 2023 global air cargo markets indicating the strongest year-on-year growth in roughly two years. This is partly due to weakness in November 2022, but also reflects a fourth consecutive month of strengthening demand for air cargo.
Global demand for air cargo, measured in cargo tonne-kilometres (CTKs), increased by 8.3% compared to November 2022. For international operations, demand growth was 8.1%.
Capacity, measured in available cargo tonne-kilometres (ACTKs), was up 13.7% compared to November 2022 (+11.6% for international operations). Most of the capacity growth continues to be attributable to the increase in belly capacity as international passenger markets continue their post-COVID recovery.
Compared to November 2019 (pre-COVID-19), demand is down 2.5% while capacity is up 4.1%.
Some indicators to note include:
• Both the manufacturing output and new export order Purchasing Managers Indexes (PMIs) – two leading indicators of global air cargo demand—continued to hover just below the 50-mark in November with small positive movements indicating a deceleration of the economic slowdown.
• Global cross-border trade recorded growth for the third consecutive month in October, reversing its previous downward trend.
• Inflation in major advanced economies continued to soften in November as measured by the corresponding Consumer Price Index (CPI), centering around 3% year-on-year for the United States, Japan, as well as the EU, in November. In the meantime, China exhibited negative annual growth in its CPI for the second time in a row.
• Air cargo yields (including surcharges) continued their significant upward trend (+8.9% since October). Rising yields are in line with improving air cargo load factors over recent months. This could be tied in part to booming e-commerce deliveries from China to western markets.
“November air cargo demand was up 8.3% on 2022—the strongest year-on-year growth in almost two years. That is a doubling of October’s 3.8% increase and a fourth month of positive market development. It is shaping up to be an encouraging year-end for air cargo despite the significant economic concerns that were present throughout 2023 and continue on the horizon,” said Willie Walsh, IATA’s Director General.
(1)% of industry CTKs in 2022 (2)year-on-year change in load factor (3) Load Factor Level
November Regional Performance (total market)
Asia-Pacific airlines saw their air cargo volumes increase by 13.8% in November 2023 compared to the same month in 2022. This performance was significantly above the previous month’s growth of 7.6%. Available capacity for the region’s airlines increased by 29.6% compared to November 2022 as more belly capacity came online with the removal of COVID-19 restrictions.
North American carriers had the weakest demand growth in November with a 1.8% increase (YoY) in cargo volumes. This was, nonetheless, a significant improvement in performance compared to October’s -1.8% contraction. Capacity increased by 4.0% compared to November 2022.
European carriers saw their air cargo volumes increase by 6.7% in November compared to the same month in 2022. This was a stronger performance than in October (1.0%). Capacity increased 6.5% in November 2023 compared to 2022.
Middle Eastern carriers had the strongest performance in November 2023, with a 13.5% year-on-year increase in cargo volumes. This was similar to the significant improvement noted in the previous month’s performance (+13.0%). Capacity increased 15.4% compared to November 2022.
Latin American carriers experienced a 4.2% increase in cargo volumes compared to November 2022, very similar to the 4.0% year-on-year increase recorded for October. Capacity in November was up 7.7% compared to the same month in 2022.
African airlines saw their air cargo volumes increase by 3.9% in November 2023, slightly improved compared to October’s +2.9% growth performance. Capacity was 14.0% above November 2022 levels.
Analysis
Multiple demand drivers facilitate upward trend in air cargo
• Global air cargo demand registered an impressive 8.3% year-on-year (YoY) growth in November – the highest annual growth of air cargo tonne-kilometers (CTKs) in roughly two years. At this point, industry CTKs lag 2019 levels by 2.5%.
• International CTKs expanded YoY both globally (+8.1%) as well as across all major trade lanes except intraEurope. The annual growth is headed by routes involving Middle East and Asia.
• Available cargo tonne-kilometers (ACTKs), which measure global air cargo capacity, maintained levels above 2019 for the past seven months. The continued expansion of international passenger belly capacity contributed to an ACTK upsurge of 13.7% YoY in November.
• The expansion in global air cargo traffic is accompanied by a small uptick in load factors (month-on-month) and supported by steady global trade figures, easing inflation across most major economies, decreasing jet fuel prices, and increasing air freight yields.
November exhibits continued growth in air cargo demand
Global air cargo demand registered 22.4 billion CTKs in November. This represents a 8.3% increase on a YoY basis – the highest annual growth since December 2021. While this performance can partially be attributed to a base effect (referring to the declining CTKs throughout most of 2022), it is also a reflection of the strong, continuous YoY demand growth over the past four months. Despite this remarkable increase, the industry's performance
remains 2.5% below pre-pandemic levels.
Similarly, seasonally adjusted (SA) CTKs continued their upward trend and grew by 8.0% YoY this month. The sustained annual growth in SA CTKs since August is in stark contrast with the overall declining trend observed in 2022. This highlights the ongoing recovery of the global air cargo market and is a signal towards closing the year on a positive note.
Cargo capacity sustained double-digit growth, a trend that has been consistent throughout most of 2023
Air cargo capacity, measured by ACTKs, reached 47.9 billion in November, surpassing the 2022 and 2019 levels by 13.7% and 4.1%, respectively. Seasonally adjusted air cargo capacity maintained 47.5 billion in November, with an annual growth rate of 13.6%, and above pre-pandemic levels.
As was the case during previous months, the doubledigit annual growth in industry ACTKs can in large part be attributed to the strong return in air passenger belly capacity. In particular, the international belly capacity registered 18.9 billion ACTKs in November. While this is the lowest value since June, it still corresponds to a remarkable 28.8% annual growth. In comparison, global international cargo capacity for dedicated freighters increased by only 1.2% this month compared to the previous year, recording 18.2 billion (the highest level since 2021).
Recent uptick in cargo load factor
Monitoring air freight movements and capacity allows deriving cargo load factors (CLF) for the industry. In November, industry CLF registered 46.7%. While this is 2.3 percentage points (pp) below 2022 levels and 3.1 pp below 2019, it represents a 1.5 pp increase compared to October 2023. Indeed, the global CLF has followed an upward trend month-on-month (MoM) over the past few months. CLF are an important indicator as they represent the balance between demand and supply within the industry. Rising load factors are beneficial for airlines because they drive both revenue and profitability at given capacity.
Sustained air cargo recovery amid constant global trade figures
While October data for industrial production has yet to be released, global cross-border trade recorded growth for the third consecutive month in October, reversing its previous downward trend. However, the levels still fall short of the post-pandemic heights achieved in 2022. Importantly, both global cross border trade and industrial production surpassed prepandemic levels in late 2020, and exceed these by 6.0% and 9.4%, respectively, as per the latest available data.
Meanwhile, the global air cargo recovery continued to gain momentum, with SA CTKs exhibiting a robust upward trend and closing in on pre-pandemic levels with 98.5% in November (+0.23 percentage points compared to the previous month).
Manufacturing output and new export orders exhibit a continued marginally contracting trend overall, with mixed economic activity across major economies
The Purchasing Managers’ Index (PMI) measures the direction of economic trends in manufacturing and services. A PMI above 50 implies that purchasing managers expect market conditions to expand compared with the previous month, and a reading below 50 implies contraction. The further away from 50, the greater the level of change, and 50 indicates no change. In line with tight financial conditions and the broader global economic slowdown, this month small MoM contractions were observed within the manufacturing output and new export order PMIs – two leading indicators of global air cargo demand.
Specifically, the global manufacturing output, as indicated by the PMI, registered 49.9 in November (up from 48.9 in October) – thereby witnessing the highest value since May and only very narrowly missing the crucial 50-point threshold (which would signify expansion). While this result still technically represents contraction of new export orders, it is an encouraging signal of a decelerating slowdown, especially in light of the global challenges faced by the manufacturing sector.
Similarly, the new export orders PMI, which measures the well-being of international trade, also experienced a MoM contraction, standing at 48.1 in November (up from 47.5 in October). Once again, the November result represents a decelerating contraction trend in the global demand for exports. In the United States, the PMIs for new export orders surpassed the 50-point threshold in November for the first time in 18 months. Across China, Europe, and Japan, however, new export orders PMIs remained below the threshold, indicating continuing tightening.
In particular, Europe lags behind both China and Japan, with its PMI falling below 45 for the seventh month in a row. The ongoing conflicts in Ukraine and the Middle East have impacted Europe's economic activities, leading to significant increases in energy and food prices. This rise in essential living costs has contributed to slowing down the economy. A similar pattern is reflected in the Manufacturing output PMI, where Europe saw continuous contractions for the eighth month in a row, trailing the other major economies. However, while in October the US had been the only country recording an expansion with its manufacturing output PMI, this month China overtook the US with its PMI jumping to 51.7 – now the highest level across the four major economies.
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Most major economies experience softening inflation
Inflation in major advanced economies continued to soften as measured by the corresponding Consumer Price Index (CPI), centering around 3% year-on-year (YoY) for the United States, Japan, as well as the EU, in November. In the meantime, China exhibited negative annual growth in its CPI for the second time in a row. Moreover, this marks the third instance of deflation this year, thus raising concerns about a looming economic slowdown. By contrast, the Producer Price Index (PPI) tracks changes in the prices producers receive for their products, and it exhibited slightly different regional trends this month. The United States, Japan, and China, all registered a deceleration compared to October, with producer prices settling at 0.8%, 0.3%, and -1.7% YoY, respectively. China's PPI YoY growth thus stayed within negative territory and initiated a reversing of its previous upward trajectory. The November PPI data for the EU 27 countries is yet to be released. The month of October, however, while continuing the negative trend in YoY growth since May, revealed an increase in producer price YoY figures (compared to the previous month) for the first time since its peak in August 2022.
The global price of oil is one of the main factors influencing consumer prices. Similarly, the global jetfuel price is a major contributor to airline operating costs. The IATA jet fuel monitor tracks the latest developments in jet fuels. In November, jet fuel prices declined by 4.0% from October, closing at USD 116.1per barrel on average.
At the same time, air cargo yields (including surcharges) continued their significant upward trend (+8.9% since October). The rising yields are in line with recently increasing air cargo load factors, which tend to support revenues, and could be tied in part to booming e-commerce from China to western markets. The Middle East conflict and related supply chain disruptions in container shipping might be putting additional upward pressure on air cargo yields, although this should become more evident once December data is released.
Strong CTK growth in Middle Eastern and Asian trade lanes in November, positive annual growth Within Asia for the first time since June 2022
The Middle East – Europe trade lane experienced its fourth consecutive growth in international CTKs, with a 23.5% growth YoY in November. It is now heading CTK growth among all major trade lanes. Asia-related trade lanes maintained their momentum from the previous months and registered annual growth in their international CTKs. Among these trade lanes, the Africa–Asia market saw the greatest annual growth of 13.0%, although slightly decelerated compared to the previous month. Africa–Asia is followed by the Middle East–Asia trade lane, which exhibited a 12.0% YoY increase this month. International CTKs on the Europe–Asia market expanded by 8.7% and the within Asia market experienced its first expansion in 17 months, with a strong 5.4% annual growth.
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