Great news for everyone working in air cargo: The sector is growing – and that’s official.
The modernisation of air cargo processes and infrastructure across the globe will help on time delivery, clearance and shipments just as the International Air Transport Association (IATA) says air freight markets in March were up 5.9 percent compared to a year ago and capacity grew 3.4 percent.
While this marks a significant improvement in volumes compared to March 2013, much of the growth took place in the final quarter of 2013 (over and above the usual year-end volume growth).
Since the beginning of the year, air cargo volumes have been basically flat. This plateau in volumes is consistent with the recent pause in improvements to business confidence and world trade.
Business conditions in the United States and Europe, however, provide a reason to be cautiously optimistic for a resumption of growth in the months ahead. Rising export orders, in particular, are expected to give positive momentum to US and European markets.
But this is balanced against the impact of a slowdown in Chinese manufacturing which is now into its fourth month. This has already impacted exports from emerging Asian countries, which contracted in February.
“Cargo markets had a boost in the last quarter of 2013, but have now levelled off. It is a competitive industry with growing capacity chasing weak demand. The business cycle will eventually swing upwards. But the air cargo industry also needs to improve its value proposition if it is to attract growth when markets improve.
“Modernising air cargo processes and infrastructure offers the potential to cut end-to-end shipping times by up to 48 hours. We cannot let market doldrums hold us back from this critical competitive gain,” Tony Tyler, IATA’s director general said.
In the 40 years since the introduction of the B747 freighter, the end-to-end shipping time for goods by air has remained unchanged, at six to seven days.
During this period, innovators have created a new value proposition for shippers and consumers based on an end-to-end model, speeding up deliveries through integrating the airline and ground components of freight, challenging the existing business model for many participants.
At the World Cargo Symposium in March, IATA’s Global Head of Cargo Des Vertannes, challenged the industry to cut the end-to-end air freight shipment time by 48 hours by the year 2020, to enhance the competitiveness and value of air cargo. According to regional reports, IATA said Asia-Pacific carriers grew 6.9 percent compared to a year ago adding that some of the March growth will reflect a resumption of business activity after the break for the Lunar New Year.
Looking ahead, however, the continuing slowdown of Chinese Gross Domestic Product growth is likely to ultimately impact trade growth and air freight demand for local carriers. In that region, capacity grew by 7.5 percent, running slightly ahead of demand.
European airlines expanded by 5.1 percent compared to March 2013. Measures of business activity in the Eurozone have been pointing to continuous expansion since mid-2013, which is expected to be maintained. Capacity expanded just 1.3 percent, strengthening load factors.
North American carriers grew 1.9 percent year-on-year. The slower growth could be a reflection of the weather-related disruption in the first quarter of the year. Business fundamentals in North America are strong, which should support greater air freight volumes in coming months. Capacity declined by 0.3 percent.
Middle Eastern carriers saw a 13.2 percent year-on-year rise in FTK volumes. This strong performance comes on the back of airlines taking advantage of growth in both developed and emerging markets. Carriers in the region are expanding their networks and services, broadening the range of goods they transport. Capacity grew just 4.7 percent, taking the load factor to nearly 50 percent.
Latin American air freight volumes were flat. Trade in the region deteriorated in early 2014, which could explain the slowdown. Capacity rose by 2.3 percent, weakening the load factor.
African airlines expanded 5.9 percent compared to March 2013. Growth in the region remains volatile, but the average for the first quarter was an expansion of 1.5 percent. Growth has been affected by a slowdown in the South African economy. Capacity grew broadly in line with demand, at 5.5 percent.