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Africa’s Freight Demand Rises 15.9% on Asian Investment Flows

By Dipo Olowookere

A new report released last week by the International Air Transport Association (IATA) has shown that African carriers saw increase in freight demand by 15.9 percent in February 2018 compared to the same month last year – the largest increase of any region.

The report disclosed that capacity increased by 3.9 percent and was helped by very strong growth on the trade lanes to and from Asia driven by ongoing foreign investment flows into Africa.

IATA said while the surge in demand on the route looks to have stabilized, volumes still increased by nearly 24 percent in year-on-year terms in January.

Globally, the report revealed that air freight markets for February 2018 recorded 6.8 percent increase in demand measured in freight tonne kilometres (FTKs) compared to the same period last year.

Adjusting for the potential Lunar New Year distortions by combining growth in January 2018 and February 2018, demand increased by 7.7 percent. This was the strongest start to a year since 2015.

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Freight capacity, measured in available freight tonne kilometres (AFTKs), grew by 5.6 percent year-on-year in February 2018.

Furthermore, demand growth outstripped capacity growth for the 19th month in a row, which is positive for airline yields and the industry’s financial performance.

The continued growth in air cargo demand is consistent with ongoing robust global trade flows. There are, however, signs that the best of the upturn for air freight has passed. Demand drivers for air cargo are moving away from the highly supportive levels seen last year.

In recent months the Purchasing Managers’ Index (PMI) for manufacturing and export orders has softened in a number of key exporting nations including Germany, China and the US. And the seasonally- adjusted demand for air cargo which rose at a double-digit annualized rate for much of 2017 is now trending at 3 percent.

“Demand for air cargo continues to be strong, with 6.8 percent 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.

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“Prosperity grows when borders are open to people and to trade, and we are all held back when they are not,” said Alexandre de Juniac, IATA’s Director General and CEO.

The report also said North American airlines’ freight volumes expanded 7.3 percent in February 2018 compared to the same period a year earlier, and capacity increased by 4.1 percent.

Seasonally-adjusted volumes are broadly trending sideways. The weakening of the US dollar over the past year has helped boost demand for air exports.

Data from the US Census Bureau shows a 10.2 percent year-on-year increase in air export volumes from the US in January 2018, compared to a slower rise in imports of 6.7 percent.

In the same vein, European airlines posted a 5.7 percent increase in freight volumes in February 2018. This was almost half the rate of the previous month and the slowest of all regions.

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Capacity increased 3.8 percent. Seasonally-adjusted volumes have been volatile in 2018 with the jump in demand in January largely reversed in month-on-month terms in February.

The strength of the Euro and the risks from protectionist measures may impact the European freight market which has benefitted from strong export orders, particularly in Germany, in recent years.

Also, Asia-Pacific airlines saw demand in freight volumes grow 6.5 percent in February 2018 and capacity increase by 7.2 percent, compared to the same period in 2017.

The upward-trend in seasonally-adjusted volumes has returned, with volumes currently trending upwards at an annualized pace of between 6.0 percent and 7.0 percent.

As the largest freight-flying region, carrying close to 37 percent of global air freight, the risks from protectionist measures impacting the region are disproportionately high.

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Dipo Olowookere is a journalist based in Nigeria that has passion for reporting business news stories. At his leisure time, he watches football and supports 3SC of Ibadan.

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