Air Cargo - Slow but Steady

Air cargo is one sector that has brought forth good cheer ahead of shipping, rail and road cargo movement

Global economies are now displaying signs of recovery aspiring to regain the ground lost during the economic downturn that began around mid-2008. However, haunted by recent experience, the optimism spawned by healthy trends remains cautiously tempered. During 2009, manufacturers and retailers alike struggled with inventory overhangs. Holdback on orders severely affected the mobility of the products from the manufacturer through the supply chain to the consumer. According to a study by Seattle-based Air Cargo Management Group (ACMG) in 2009, revenues for the US domestic air cargo industry suffered a decline of more than 20 per cent from the previous year. Indeed, according to Robert Dahl, Managing Director, ACMG, revenue in 2009 was the lowest for the industry since 1997.

By end 2009, the situation began to change significantly. The movement of increasing volumes of produce was adversely affected by lack of capacity as cargo carriers had downsized their capabilities and even mothballed freighters. With growing demand, cargo forwarders complained that they were being squeezed by high carrier rates. In effect, the market displayed a completely new picture during the year. During 2010, as demand and production trends steadily continue their march away from recessionary depths, the industrial sectors that provide mobility to products and goods—transportation, freight, cargo and logistics industries—are also showing signs of growth. Air cargo is the one sector that has brought forth good cheer ahead of shipping, rail and road cargo movement. According to the International Air Transport Association (IATA), international scheduled traffic statistics for June 2010 showed continued strong demand growth as the industry recovered from the impact of the global financial crisis. When compared with June 2009, international scheduled freight traffic showed a healthy 26.5 per cent improvement. The statistics for July 2010 showed only a 22.7 per cent improvement over July 2009. The trend is definitely of a slow growth rate. Nonetheless, the overall air cargo volumes have shown an increase by 38 per cent through the first half of this year. This figure is in sharp contrast to the 13 per cent growth in shipping.

However, this cheerful bit of statistics is not applicable worldwide. Part-year data for 2010 shows moderate gains in the US, but the domestic US air cargo market does not display the same effervescence visible in the air cargo sector in many other parts of the world. According to ACMG, several factors, including competition from improved trucking services, will mean that future growth in the US domestic air cargo market will be modest even with an improving economy. The situation is somewhat better in Asia. According to the Association of Asia Pacific Airlines (AAPA), the beginning of 2010 recorded more than 33 per cent growth in freight-tonne kilometres over the previous year. However, if January 2008 is taken as the datum, then performance in January 2010 was 7 per cent low. Since then there has been an increase in capacity. According to IATA, global air freight capacity grew 12.2 per cent and Asia-Pacific capacity by 20.5 per cent in June over last year. However, the average air freight prices for cargo moving out of Asia fell 10.3 per cent in June as airlines brought capacity back into the market.

According to a report from the Airports Council International, in 2009, Hong Kong International Airport retained its position as the world’s busiest global cargo airport for the 14th consecutive year. The cargo tonnage increased by 24.5 per cent as compared to the previous year. Australia’s V Australia and UK based Virgin Atlantic together carried 1,94,000 tonnes of airfreight during the UK financial year ended March 31, 2010. In the following quarter, cargo revenue grew 36 per cent and the tonnage by 25 per cent compared to the same period in 2009, the carriers say. Germany’s Frankfurt Airport handled 20.4 per cent more air cargo in July, year-on-year to 1,88,244 tonnes, setting the monthly record, according to airport authorities. The prognosis for the second half of 2010 is that global cargo carriage will grow by around 30 per cent in comparison with the same period last year due to high demand from Asia, the EU and the US. This prediction refers to both, the domestic and international freight airlines.