Cargo Volumes Slide Further amid Worsening Economic, Geopolitical Climate but Rates are still High
Asia Pacific airlines saw another month of cargo decline in July as supply chain issues coupled with inflationary pressures and geopolitical tensions further dampened demand for air shipments.
The Kuala Lumpur-based Association of Asia Pacific Airlines (AAPA) said Asia Pacific airlines saw international air cargo demand — measured in freight tonne-kilometres (FTK) — “dropped markedly” by 11.6% year-on-year last month compared to July 2021.
This comes as APAC airlines have already been recording declines in cargo volumes since March after 14 consecutive months of growth. Last June, Asia Pacific airlines reported a 4.1% year-on-year decline in air cargo.
“Air cargo markets weakened further, set against a backdrop of falling export orders alongside worsening business and consumer confidence levels,” AAPA said.
It added that freight capacity offered, however, held relatively steady, edging just 0.4% lower.
APAC air cargo weakens further
As a result, the average international freight load factor declined by 8.6 percentage points to 67.8% for the month.
“Prevailing supply chain disruptions, inflationary pressures and geopolitical tensions further dampened demand for air shipments,” commented Subhas Menon, director general, AAPA.
“Nevertheless, the robust recovery in passenger travel is supporting the industry’s return to profitability, even though cost pressures abound.”
July’s cargo performance is in contrast with the recovery seen in passenger numbers in the region for the month.
AAPA noted that the “strong recovery” in international air passenger markets continued unabated.
“The region’s airlines flew a combined total of 11.3 million international passengers in July, surpassing the 10 million mark for the first time since February 2020 when the Covid-19 pandemic led to a collapse in global travel markets,” Menon said, adding that the average international passenger load factor reached a pandemic high of 80.0% for the month.
Bumps in the road to recovery
Looking ahead, Menon said the general aviation industry would have a better year, although warning of challenges ahead.
“Overall, 2022 looks to be a better year by far, although there will be bumps in the road to recovery,” the AAPA chief said.
“Immediate challenges include operational constraints resulting from manpower shortages, in addition to rising costs amid a distinct slowdown in global economic growth,” he added.
In a recent interview, LSCMS President, Dr. Raymon Krishnan, commenting on the current state of play, commented “Whilst we are seeing lower demand for both air and ocean volumes and peak season is off to a slow start this year, rates are still fairly robust and are nowhere near pre COVID rate levels. This means that there is still quite some flex and opportunity for both shippers, carriers and 3PL’s. It is still too early to predict where the markets are headed”.