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Global air freight demand slump slows in potential boost for jet fuel

Highlights

Global cargo demand fell 20.3% in May

Loss of belly cargo contributing to capacity crunch

Cargo carriers in Europe hardest hit in May

Dubai — The plunge in global air freight demand from the coronavirus pandemic slowed in May as capacity shrank, the International Air Transport Association said June 30, providing a potential boost to the hard hit jet fuel sector.

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Global cargo demand fell 20.3% in May from a year earlier, compared with a 25.6% year-on-year plunge in April, IATA said in a report. Global capacity continued to contract, albeit at a slower pace from April, IATA said. Global capacity shrank by 34.7% year-on-year in May, compared with the 41.6% year-on-year contraction in April, mainly due to a loss of belly cargo on grounded passenger aircraft.

"The gap between demand and capacity shows the challenge in finding the space on the aircraft still flying to get goods to market," said Alexandre de Juniac, IATA's CEO. "For that the prospects for air cargo remain stronger than for the passenger business but the future is very uncertain. Economic activity is picking up from April lows as some economies unlock. But predicting the length and depth of the recession remains difficult."

Biggest drag

The biggest drag on oil demand this year is set to be from the aviation sector that will last well into 2022, according to the International Energy Agency. Jet kerosene demand will drop by 3 million b/d in 2020, before rebounding by just 1 million b/d in 2021, leaving it short of the pre-crisis levels, the IEA said in its latest monthly oil market report published on June 16.

S&P Global Platts Analytics said June 19 in a report that the global aviation sector has recovered, with non-commercial traffic at normal or slightly better levels than before the crisis while commercial activity is still down 54%.

European airlines were the hardest hit cargo carriers in May among all regions, recording a 29.7% plunge in international volumes due to "limited manufacturing output and lockdowns," IATA said.