Last week IATA released their May 2019 Air Freight Analysis report, stating in seasonal adjusted terms the level of freight tonne kilometres (FTK’s) ticked up modestly for the third consecutive month, suggesting we may be past the low point of this cycle, although the recovery remains tentative at this stage.

The weakness in freight volumes compared with a year ago remains broad-based. As was the case in April, Africa and Latin America contributed positively to industry-wide- on-year- FTK growth result.

From the recent G20 talks it appears that US-China trade relations have thawed somewhat and negotiations will recommence shortly.

This follows the end-June announcement of President Trump cancelling the planned 25% tariff on an additional $300bn worth of Chinese goods.

Airlines have responded to the period of weakness in freight demand partly through reducing capacity in the market. Growth in available freight tonne kilometres (AFTK’s) slowed to just 1.3% in May 2019 compared to May 2018.

While this represents a relatively modest increase, the growth of supply is still around 5 percent points higher than that of demand growth. Consequently, the industry-wide freight load factor maintained the downward trend seen in the last 13 months, and is currently a substantial 2.3% points below its level a year ago.

Asia Pacific & Middle East

Amidst the implementation of a new round of tariffs on US-China trade in mid-May, international FTK’s flown by airlines based in Asia Pacific fell by around 7% year-on-year in May, after a revised 11% decrease in April.

The effect of the US-China trade war has clearly had an impact on the regional growth in Asia Pacific. This is despite evidence suggesting that production lines had shifted within the region to try to counter the adverse effects of the rising trade tensions between China and the US.

North America

North America has seen the weakest outcome since early 2016, with international freight volumes deteriorate by 3.2% year-on-year.

Latin America

After three consecutive months of international freight growth, Latin America returned to negative year-on-year growth in May. International FTK’s are currently 0.5% below their level of May 2018.

Europe

International FTK’s for the European carrier are currently unchanged from their year –ago level. This represents a substantial improvement from an annual decline of 6.7% last month.

Africa

Airlines in the smaller Africa international market posted a swift 8.3% growth compared to the same period last year, making Africa the strongest performer on that measure for the 3rd consecutive month.

BUT we can continue talking about what we do know if we leave the EU with a ‘no deal’.

Zero Import DUTY
HMRC has announced a Zero Import DUTY will be payable for the first 12 months when importing from Europe only.

VAT Deferred Scheme
The government will introduce postponed accounting for import VAT on goods brought into the UK. This means that UK VAT registered businesses importing goods to the UK will be able to account for import VAT on their VAT return, rather than paying import VAT on or soon after the time that the goods arrive at the UK border. This will apply to imports from the EU and non-EU countries.

Transitional Simplified Procedures (TSP)
HMRC has written to 145,000 VAT-registered businesses trading with the EU to inform them of the simplified procedures. The letter advises that once registered for TSP, businesses will be able to transport goods from the EU into the UK without having to make a full customs declaration at the border. Businesses will also be able to postpone paying any import duties until the month after import.

The TSP policy will be reviewed 3 to 6 months after its introduction with at least 12 months notice being given to businesses before its withdrawal.

The new procedures reduce the amount of information importers are required to provide in an import declaration by allowing importers to:

  • Defer giving a full declaration until after the goods have crossed the border; and
  • Defer paying any duty until the month following importation

Where tariffs apply to the imported goods, TSP registered businesses will be required to set up a direct debit to defer the payment of any import duties. You will need an EORI number to register.

EORI Number
If you import from outside the EU then you will already have an EORI number, however if you are trading with Europe and do not have an EORI you will need one after Brexit and should apply now. Application is free and quick to complete.

For further information on the above please contact your designated account manager.

According to a recent release by The International Air Transport Association (IATA) demand for air cargo continues to face significant headwinds. Global economic activity and consumer confidence have weakened and the Purchasing Managers Index (PMI) for manufacturing and export orders has indicated falling global export orders since September 2018.

Only two of six regions reported year-on-year demand growth in January 2019 – North America and Africa. Asia-Pacific, Europe and the Middle East all contracted, while Latin America was flat.

Asia-Pacific airlines saw demand for air freight shrink by 3.6% in January 2019, compared to the same period in 2018. Weaker manufacturing conditions for exporters in the region, ongoing trade tensions and a slowing of the Chinese economy impacted the market. Capacity increased by 4.1%.

North American airlines posted the fastest growth of any region for the eighth consecutive month in January 2019, with an increase in demand of 3.3% compared to the same period a year earlier. Capacity increased by 5.0%. The strength of the US economy and consumer spending have helped support the demand for air cargo over the past year, benefiting US carriers.

European airlines experienced a contraction in freight demand of 3.1% in January 2019 compared to a year ago. Capacity increased by 2.8% year-on-year. Weaker manufacturing conditions for exporters, and shorter supplier delivery times particularly in Germany, one of Europe’s key export markets, impacted demand. Trade tensions and uncertainty over Brexit also contributed to a weakening in demand.

Middle Eastern airlines freight volumes contracted 4.5% in January 2019 compared to the year-ago period. Capacity increased by 4.1%. Seasonally-adjusted international air cargo demand, which trended upwards for the past three months helped by stronger trade to/from Europe and Asia, has started to decline.

Latin American airlines freight demand was flat (0.0%) in January 2019 versus last year. Despite the economic uncertainty in the region, a number of key markets are performing strongly. Freight traffic within South America and between Central and South America grw at a double-digit rate in January. And demand on routes between North and South America also performed well. Capacity decreased by 0.7%.

African carriers saw freight demand increase by 1.0% in January 2019, compared to the same month in 2018. Capacity grew 8.2% year-on-year. Seasonally-adjusted air cargo demand has now trended upwards for six months. And while seasonally-adjusted international freight volumes are lower than their peak in mid-2017, they are still 35% higher than their most recent trough in late-2015.

Source: IATA Airfreight Market Analysis January 2019

Bristol Port, one of the UK’s Major Ports, has revealed that they are Brexit ready in a new information sheet that explains why they are optimistic about the future in these uncertain times.

Chief Executive Officer, David Brown, reported:

“65% of the cargo that Bristol Port deals with is non-EU. We remain confident that our systems and operations will continue to function smoothly and efficiently once we leave the EU and whether there is a deal or not. Bristol Port does not deal with food for people nor with accompanied roll-on roll-off trailers. We have had excellent dialogue with the relevant Government Departments and we expect any additional administrative burden to be kept to a minimum. And the one thing that Brexit cannot change is our geography and we strongly believe our west coast gateway will enable us to thrive and flourish in the post Brexit trading climate.”

As a global gateway, Bristol Port adds £1 billion to the British economy every year. The Port handles an eclectic range of cargos with multiple and frequent global connections. With a deep-water depth of 14.5m accommodating vessels up to 130,000 tonnes dwt, the Port has the natural capabilities to handle some of the largest ships in the world. Bristol Port has invested more than £500 million of private finance into the Port since 1991. Recent investments have included a £7m container terminal update, the purchase of 2 new RTGs (rubber-tyred gantry cranes) and the purchase of additional land to meet customer requirements for storage.

Bristol Port is ready to continue trading as a global gateway, whatever the Brexit outcome.

Did you know we have an office based at the Bristol Port. Our team can provide a range of freight forwarding services to meet your requirements. For more information please send your enquiry to sales@uk.ligentia.com