The effects of Covid-19 in Asia and war in Ukraine brought negative consequences for global air cargo markets, which have registered a drop in demand with fewer goods being shipped by air.
1. Sanctions and rising oil prices
The announcement was made by the International Air Transport Association (IATA), which says that global demand fell 5.2% compared to March 2021, registering -5.4% for international operations. The war in Ukraine led to a fall in cargo capacity used to serve Europe as several airlines based in Russia and Ukraine were key cargo players. On top of that, sanctions against Russia led to disruptions in manufacturing and rising oil prices are having a negative economic impact, including raising costs for shipping.
Air cargo markets mirror global economic developments. In March, the trading environment took a turn for the worse. The combination of war in Ukraine and the spread of the Omicron variant in Asia have led to rising energy costs, exacerbated supply chain disruptions, and fed inflationary pressure.Willie Walsh, IATA’s Director General
Walsh believes that peace in Ukraine and a shift in China’s Covid-19 policy would do much to ease the industry’s headwinds. However, as neither appears likely in the short-term, he said, growing challenges for air cargo are to be expected just as passenger markets are accelerating their recovery.
2. Cargo demand shrinks
According to IATA, new export orders, a leading indicator of cargo demand, are now shrinking in all markets except the US. The Purchasing Managers’ Index (PMI) indicator tracking global new export orders fell to 48.2 in March — the lowest since July 2020. Global goods trade has continued to decline in 2022, with China’s economy growing more slowly because of Covid-19 related lockdowns (among other factors) and supply chain disruptions amplified by the war in Ukraine.
Finally, inflation also plays a role, with general consumer price inflation for the G7 countries at 6.3% year-on-year in February 2022, the highest since 1982.
3. Regional performance
According to IATA, European carriers saw a 11.1% decrease in cargo volumes in March 2022, compared to the same month in 2021. This was the weakest of all regions. The Within Europe market also fell significantly, down 19.7% month on month, an outcome attributable to the war in Ukraine.
As for Asia-Pacific airlines, they saw their air cargo volumes decrease by 5.1% in March 2022, compared to the same month in 2021. Available capacity in the region fell 6.4% compared to March 2021, the largest drop of all regions. Here, the zero-Covid policy in mainland China and Hong Kong is impacting overall performance.
In the Middle East, carriers experienced a 9.7% year-on-year decrease in cargo volumes in March. This drop is associated to the war in Ukraine, since significant benefits from traffic being redirected to avoid flying over Russia failed to materialize.
In Africa and Latin America, air cargo registered an increased when compared to last year, with 3.1% and 22.1%, respectively.