Summary:
- ACI World reports divergent freight and passenger statistics for 1Q2019;
- Freight figures suggest an economic downturn might be coming;
- But does the problem essentially boil down to the impact of a US - China 'trade war' and potentially looming issues with Iran?
Indeed, that trade war, together with military tensions that have emerged between the US and Iran (and which, along with sanctions on Venezuela have already impacted on oil prices), have been seized upon by airport operator ACI World as being important factors in a freight downturn during the first quarter of the year.
ACI World reports that airfreight volumes decreased by -2.1% in 1Q2019. International volumes had "regained some of their momentum" with a -1.3% decrease in Mar-2019 following a -6.7% decline in Feb-2019, but it is not a bright picture. In 1Q2019, international volumes decreased by -3.2% and domestic freight increased by -0.1% influenced by a +0.5% growth in the North American market.
These figures contrast with continuing growth in the global passenger segment although at +4.1% year-on-year in 1Q2019, it was below the 12 month rolling average of +5.3%. International traffic increased +3.9% in Mar-2019, also a slowdown from +4.8% growth in Feb-2019. The domestic market "gained some momentum" with a +3.4% increase in Mar-2019 compared to +3.1% growth in Feb-2019.
Maybe taking a regional look could help? Asia Pacific was identified by ACI as being under pressure from "the ongoing trade war" (mainly China-US), resulting in disruptions to a number of industries' supply chains. Airfreight decreased by -5.5% in 1Q2019. Domestic and international freight recorded "similarly negative figures". Strangely perhaps, Europe was the only "major regional market" to record growth in Mar-2019 with a modest +0.4% increase, but volumes decreased by -1.5% in 1Q2019 though, driven down by falling international freight.
The picture in the passenger segment is quite different where there was a +4.1% year-on-year increase in 1Q2019. Asia Pacific, the region which "has been the largest engine of growth for the industry in recent years", is "showing the effects of global headwinds," says ACI, but Europe showed healthy traffic growth and the same was the case in North America. Despite predictions of an economic downturn, both markets performed surprisingly strongly.
Meanwhile across Africa and the Middle East, "a continuation of ongoing geopolitical trends - the Qatari diplomatic crisis and tensions between major regional players and some Western nations is having an impact on the region's traffic," says ACI.
Whether any of this amounts to much where a possible economic downturn is concerned is open to debate. There are some indicators, but no more than that. The main issue is undoubtedly the imposition of further tariffs on Chinese goods entering the US, how and to what degree the Chinese reciprocate and the impact of this 'trade war' on both countries' economies. Collectively, they could bring the global economy crashing down.
There is a likelihood that one side will blink and it is more likely to be the Chinese side. That is President Trump's gamble and his recent trip to Japan might well be tied up with it. The Iranian issue is harder to call. No-one wants international conflicts in that region of the world, and for that reason alone there will probably not be one. But the stand-off as it is has already impacted oil prices with Brent Crude exceeding USD70/barrel as this is written. Iran is the world's seventh largest producer.
Once these rises work their way into the aviation system in the form of fare hikes and surcharges, (and even if the US - China trade war dampens fuel consumption, which is a contributory factor to the rises now) both passengers and freight can be severely impacted. The 2Q2019 result is awaited with interest.