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Global Air Freight: On a Growth Trend in 2017

If industry analysts and trade organizations are on target, 2017 could turn out to be a very good year for global air freight. Some of the most positive outlooks right now are coming from the International Air Transport Association (IATA), whose latest report said that global air freight markets (measured in freight tonne kilometers [FTKs]), rose 6.8% in November 2016 compared to the same period in 2015.

And while this was a slight slowdown rate from the 8.4% annual growth recorded in October 2016—which was a 20-month high—IATA says it was still more than 2.5 times the average annual monthly growth of 2.6% over the past decade. “The uptick in freight growth coincides with an increase in the shipment of silicon materials typically used in high-value consumer electronics shipped by air, and an apparent turnaround in new export orders,” IATA reports, noting that a modal shift to air cargo following the collapse of the Hanjin Shipping Company in August may have also contributed.

According to IATA’s data, airlines in all regions except Latin America reported an increase in year-on-year demand in November 2016. During that time, North American carriers’ freight volumes expanded 5.6% compared to the same period a year earlier, while capacity increased by 2.6%. Freight traffic across the Atlantic continued to strengthen, increasing by 9.0% in October. “This is being driven in part by an increase in westbound import flows from Europe to the U.S., helped by a strong dollar,” IATA notes.

“Air cargo enjoyed a strong peak season in November,” said Alexandre de Juniac, IATA’s director general and CEO, in a press release. “And there are encouraging signs that this growth will continue into 2017, particularly with the shipment of high-value consumer electronics and their component parts. But, the trend in world trade is still stagnant. So it remains critically important for the air cargo industry to continue to improve its value offering by implementing modern customer-centric processes.”

Air Cargo Upswing Ahead

In Air Cargo upswing on the horizon, The STAT Trade Times’ Shreya Bhattacharya & Reji John predict a “mixed bag” ahead for the air freight industry, but note that the outlook at this point is mainly positive.

“For the global air cargo industry it mostly has been a case of too much lift chasing too little freight leaving yields under tremendous pressure,” the authors write. “While industry stakeholders innovate to create specialized capabilities to shipping goods across different business verticals thus opening an opportunity to enhance yields; the consensus is that the current challenges are going to be there for some time but an upswing is certainly on the horizon.”

The STAT Trade Times isn’t alone in its bullish outlook. In the recent Global Air Freight Market Growth Will Rise Through 2021 report, research firm MarketLine forecasts an increase in air shipments of both export and import cargo on the international front, and hints that the recent Hanjin bankruptcy could bode well for the air freight sector. In assessing MarketLine’s data, Global Trade says that the global air freight sector has shown varied growth and declines between 2012 and 2016, registering an overall compound annual growth rate (CAGR) of 0.7 percent between 2012 and 2016 to reach a value of $101.3 billion.

“MarketLine’s latest report shows that the air freight sector’s growth is primarily driven by the Middle East and Asia-Pacific (APAC) as a result of increased manufacturing,” Global Trade reports. “With an underdeveloped internal market, opportunity for future growth is also possible, particularly in larger countries like China and India.”

“The International Air Transport Association suggested a global price drop per Freight Ton Kilometer in 2016,” said Paul Todd, MarketLine analyst. “As such, a global decrease in value was identified in 2016 despite volume continuing to climb. While the price of crude oil has decreased, allowing a certain amount of breathing room for freight companies, the effect of overcapacity has suppressed freight yields and forced rates downwards.”

Carrying the World’s Cargo 

Airplane makers also see goods things ahead this coming year, and beyond. In Boeing’s 2016-17 forecast, for example, the manufacturer says that world air cargo traffic has struggled to maintain sustained growth since the end of the global economic downturn in 2008 and 2009. After bouncing back in 2010, then stagnating in 2011 and 2012, air cargo began growing again in mid-2013, even growing 4.8% in 2014, Boeing reports. Growth accelerated in the first quarter of 2015, but, then traffic volumes remained stagnant for the rest of that year.

“Air cargo traffic gathered some strength after a weak first quarter of 2016, and is projected to return to trend growth by 2018,” Boeing reports, noting that—despite the weak growth of the past decade—more than one-half of air cargo is still carried on freighters.

“Although the air cargo industry suffered setbacks in the aftermath of the global  financial crisis, and renewed growth has been slow to come, these conditions should be viewed within the larger context of the way the world, its economies, and its production systems are developing,” Boeing reports. “In such a world—faster-paced, more international, more dependent on connections between regions—air cargo will remain a vital service for global business.”

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