AIRLINES FORECAST CARGO TRANSPORT AMID ESCALATING TRADE WAR TENSIONS.

IATA lowers its air transport growth forecast for 2025 due to escalating trade war tensions, warning of a decline in cargo revenue and volume, despite the overall industry remaining profitable.

 

 

International air freight

 

The association stated that air cargo demand is now forecast to grow by only 0.7% year-on-year, with member airlines expected to transport 76 million U.S. tons, down from the 80 million tons forecast issued in December. In 2024, air cargo volume grew by 12%, a record high based on average data from various sources. Six months ago, IATA had predicted that cargo volume for both passenger and freight airlines would increase by 5.8% this year.

 

The U.S. decision to eliminate the de minimis rule, which allowed packages valued under $800 from China and Hong Kong to enter the country without duties or complex customs procedures, is also putting downward pressure on cargo volumes. This is because e-commerce retailers are shifting from direct-to-consumer shipping to fulfilling orders from U.S.-based warehouses, which are supplied by lower-cost ocean shipments.

 

IATA noted that member airlines’ cargo revenues are expected to decline by 4.7% to $142 billion due to slower global economic growth caused by increased tariffs and other protectionist policies that tend to restrict cross-border trade.

 

IATA’s December forecast projected cargo revenues at $157 billion. Cargo yields are also expected to fall by 5.2%, reflecting a combination of slower demand growth and lower oil prices. When jet fuel prices rise, airlines typically apply fuel surcharges, which usually include a margin added on top of costs.

 

The new estimates indicate that the air cargo market could experience a sharp downturn in the second half of the year, potentially wiping out the usual peak season. Recently, IATA reported that cargo demand remained strong, increasing by 5.8% in April compared to the same month last year. According to IATA data, cargo traffic (including distance factor alongside weight) rose 2.4% year-on-year in the first quarter.

 

Analysts believe the growth so far this year is mainly due to businesses accelerating orders from foreign suppliers to import goods before tariff schedules take effect. This mirrors what happened when shippers anticipated extensive tariffs from the Trump administration before their official implementation in early April. After the White House paused tariffs for 90 days to encourage negotiations and lowered tariffs on Chinese goods to 30%, both ocean and air shipments to the U.S. increased as importers stockpiled goods ahead of tariff adjustments.

 

Many countries have retaliated against U.S. tariffs or plan to do so as U.S. tariffs continue to take effect next month.

 

Overall, for both passenger and cargo segments, airlines are expected to strive for modest profits, with total revenue rising 1.3% while total costs increase by 1%. Positive employment trends and easing inflation are expected to sustain passenger demand, though at a slower pace than previously estimated. Airline revenues are now forecast at $979 billion in 2025, down from the $1 trillion estimated in December. Net profits have also been revised down to $36 billion from $36.6 billion six months ago, resulting in a net profit margin of 3.7%.

 

Source: Freight Waves

 

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