Economic Outlook Q2 2014
Air freight growth is showing solid improvement compared to a year ago, supported by the cyclical upswing in the global economy. However, high jet fuel prices and weakness in yields continue to place downward pressure on financial performance. Consumers in Europe and the US are becoming increasingly more confident, which has supported growth in demand for air-freighted commodities like semi-conductors.
Source: Haver Analytics
However, recent developments in the demand environment suggest that growth could weaken in months ahead. According to the IATA Cargo eChartbook Q2 (pdf), business confidence has flattened and world trade volumes have started to decline. Moreover, growth in world trade may be limited by the trend toward on-shoring of production.
Ratio of world trade to domestic industrial production
Source: Netherlands CPB
Jet fuel prices have been stable, but remain high at about $120 per barrel, and yields are down on a year ago, continuing to put on strain on financial performance. As new aircraft deliveries come into service in 2014, there could be further downward pressure on yields. Cargo heads surveyed in April expect yields to remain stable during the year ahead, and while they anticipate volumes to increase, rates of growth have been downgraded.