Air Cargo Business Faces Long-Term Headwinds

AIN Air Transport Perspective » March 17, 2014
IATA chief economist Brian Pearce suggested the possibility that air cargo yields will continue to decline. (Photo: Chris Pocock)
March 13, 2014, 2:07 PM

More than 1,000 delegates attending the March 11 to 13 IATA World Cargo Symposium in Los Angeles heard a downbeat assessment of prospects for air freight from FedEx chairman and CEO Fred Smith and IATA chief economist Brian Pearce, both of whom talked of long-term structural challenges.

“The winds are not favorable,” said Smith, who noted that for two decades air cargo volumes grew at 2.5 times world GDP. The recession of 2007 to 2009 ended that growth, and apart from a brief spurt in 2010 as companies replenished inventories, tonnages have stagnated. In the meantime, passenger traffic has rebounded and grown strongly. Smith listed numerous factors that have affected the air cargo business: “indigenization” of manufacturing; increased trade protectionism; miniaturization of electronics; low interest rates leading to lower inventory “carrying costs” that reduce the need for speed in the transport of goods; high fuel costs; and more reliable ocean freight services. Although the express industry he pioneered continues to enjoy moderate growth, “the golden age of air cargo is over,” Smith declared.

Pearce listed similar factors, particularly noting the phenomenon of “on-shoring,” or the reduction of long-distance sourcing of consumer goods and industrial parts. He reported that freight load factors and utilization of freighter aircraft have now stabilized after three difficult years. But he said that air cargo yields might continue to decline because overall belly-hold capacity provided by widebody passenger aircraft continues to grow substantially. The trend has led to the parking of many freighter aircraft, probably permanently, including recently converted jets such as Boeing 747-400BCFs.

IATA commissioned a study on the modal shift from air cargo to ocean freight from the Seabury Group, whose executive director, Gert-Jan Jansen, reported the findings at the symposium. “All product groups have experienced modal shift, and our survey of shippers suggests it will continue,” he said. “The cost of [air] transportation is the biggest single factor.”     

 

FILED UNDER: 
Share this...

Please Register

In order to leave comments you will now need to be a registered user. This change in policy is to protect our site from an increased number of spam comments. Additionally, in the near future you will be able to better manage your AIN subscriptions via this registration system. If you already have an account, click here to log in. Otherwise, click here to register.

 
X