Two indicators in the aviation industry may be pointing to a looming global downturn
Two indicators in the aviation industry may be pointing to an economic downturn: declining demand for air cargo and a “peak” in aircraft orders last year, according to the executive chairman of CAPA Centre for Aviation.
Speaking to CNBC’s “Squawk Box” on Monday, Peter Harbison explained that cargo demand is “typically seen as a forward indicator of ... not just the airline industry, but where the economy generally is heading.”
“Cargo is now declining fairly steeply, which suggests that the economy ... is not going to look so good,” Harbison said.
As the world’s two largest economies remain deadlocked in a dispute over trade and technology, fears of a global recession have emerged.
Demand in global air freight markets fell by 4.7% as compared to the same period last year, according to the International Air Transport Association.
Trade uncertainties — triggered by Brexit, as well as tariff tensions between the U.S. and China — contributed to declining new export orders and the weakness is likely to persist in the coming months, according to IATA, the global trade association for airlines.
While there was a surge in demand for cargo about six to nine months ago — which gave “some kind of optimism” — Harbison maintained that the increase may just be a “one-off surge.”
The “peak” in aircraft orders in 2018 may also be another indicator of a slowing global economy, Harbison said.
“Leaving aside the impact of grounding the Maxes — assuming that will start to be rectified within the next 6 months at least — I think we probably did see a peak in aircraft orders last year, which unfortunately, generally, cyclically seems to precede the year when things turn down a bit,” he said.
Boeing’s best-selling plane, the 737 Max, has been grounded since mid-March after two deadly crashes of their 737 Max airplanes, and the company isn’t expected to announce any orders of the plane.
The Paris Air Show was also supposed to set the stage for Boeing to reveal that it will offer a highly anticipated new aircraft, but analysts say the company has likely shelved those plans against the backdrop of safety concerns.
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