War in Ukraine and Omicron weigh on air cargo

Date Added: 4 May 2022

War in Ukraine and Omicron weigh on air cargo
 
Through our subsidiary, Davies Turner Air Cargo, we have a strong presence in the expedited airfreight arena and note that IATA released March 2022 data for global air cargo markets showing a drop in demand. The effects of Omicron in Asia, the Russia – Ukraine war and a challenging operating backdrop contributed to the decline.

IATA said that global demand, measured in cargo tonne-kilometers (CTKs), fell 5.2% compared to March 2021 (-5.4% for international operations), whilst capacity was 1.2% above March 2021 (+2.6% for international operations).

While the latter is in positive territory, it is a significant decline from the 11.2% year-on-year increase in February. Asia and Europe experienced the largest falls in capacity.
    
Several factors in the operating environment should be noted, said IATA.
    
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. Sanctions against Russia led to disruptions in manufacturing. And rising oil prices are having a negative economic impact, including raising costs for shipping.

New export orders, a leading indicator of cargo demand, are now shrinking in all markets except the USA. The Purchasing Managers’ Index (PMI) indicator tracking global new export orders fell to 48.2 in March. This was 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.

General consumer price inflation for the G7 countries was at 6.3% year-on-year in February 2022, the highest since 1982.

“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. As a result, compared to a year ago, there are fewer goods being shipped—including by air. Peace in Ukraine and a shift in China’s COVID-19 policy would do much to ease the industry’s headwinds. As neither appears likely in the short-term, we can expect growing challenges for air cargo just as passenger markets are accelerating their recovery,” said Willie Walsh, IATA’s Director General.

As the UK’s highest placed independent freight forwarder in the IATA/CASS league table for 2020, measured by CASS airline tonnage, Davies Turner Air Cargo welcomes enquiries about our global airfreight services. Just contact aircargo@daviesturner.co.uk or visit https://www.daviesturner.com/air-freight
 

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