IATA: Rising protectionism poses risks to prosperity

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Air cargo demand remained strong in February but the International Air Transport Association (IATA) has warned that rising protectionism poses a severe risk to prosperity.

Demand measured in freight tonne kilometres (FTK) increased 6.8 per cent in February and by 7.7 per cent in the first two months of the year, the strongest start to a year since 2015.

Capacity in available FTK (AFTK) grew by 5.6 per cent year-on-year in February, marking the 19th consecutive month that demand has outstripped capacity, which is positive for airline yields and the industry’s financial performance.

IATA says the continued growth is consistent with on going robust global trade flows but there are signs that the best of the upturn for airfreight has passed.

The association says the Purchasing Managers’ Index for manufacturing and export orders has softened in a number of key exporting nations including Germany, China and the USA, and seasonally adjusted demand is now around three per cent.

IATA director general and chief executive officer, Alexandre de Juniac says: “Demand for air cargo continues to be strong, with 6.8 per cent growth in February. The positive outlook for the rest of 2018, however, faces some potentially strong headwinds, including escalation of protectionist measures into a full-blown trade war. Prosperity grows when borders are open to people and to trade, and we are all held back when they are not.”

Africa saw the strongest growth in February, increasing 15.9 per cent year-on-year helped by trade lanes to and from Asia performing well driven by foreign investment flows into the continent.

Latin American seasonally adjusted international freight volumes are now back to the levels seen at the end of 2014 helped by economic recovery in Brazil, pushing demand up 8.7 per cent in February.

The Middle East grew by 7.4 per cent but seasonally adjusted volume growth has slowed to four per cent reflecting weak conditions on routes to and from Europe.

North America expanded by 7.3 per cent with the weakening US dollar helping exports grow, with imports rising at a slower rate.

Demand in Asia Pacific increased 6.5 per cent in February but IATA warns that protectionist measures would hit the region disproportionately hard.

Europe airlines had the slowest growth at 5.7 per cent, with the strength of the Euro and the risks from protectionist measures threatening to harm the market that has benefitted from strong export orders, particularly in Germany.