2019 State of Logistics: Air cargo

Air cargo capacity outpaces demand as carriers regroup

By ·

When the International Air Transport Association (IATA) released data for global airfreight markets this June, it noted that demand fell 4.7% compared to midyear 2018, thereby signaling a negative trend in year-on-year demand that began last January.

Freight capacity, meanwhile, grew by 2.6% year-on-year in June 2019, outpacing demand for the last 12 months.

“Air cargo volumes have been volatile in 2019 due to the timing of Chinese New Year and Easter, but the trend is clearly downwards, with volumes around 3% below the August 2018 peak,” says Alexandre de Juniac, IATA’s director general and CEO, adding that Brexit-related trade uncertainty in Europe and trade tensions between the United States and China have all contributed to declining new export orders.

In month-on-month terms, export orders have increased only three times in the past 15 months and global data has been indicating negative export demand since September. The continued weakness is likely to lead to further subdued annual freight tonnage growth in coming months. “Cost inputs are rising, political tensions are affecting confidence, and global trade is weakening,” de Juniac concludes.

Brandon Fried, executive director of the Washington, D.C.-based Airforwarders Association (AfA), concurs, observing that “the cat is out of the bag” in regard to global trade relationships. “It’s tough to put that cat back in,” he says. “Furthermore, domestic politics here in the U.S. are another complicating concern for air cargo shippers. Our political leaders have to realize that all major passenger airports are also vital cargo hubs, and while we’re encouraged by investment in infrastructure, the federal government can’t do it alone.”

It is also becoming apparent that road infrastructure adjacent to airports is under the control of local governments. “That’s a significant worry too,” says Fried. “In some cases, this is an even bigger issue.”

On a brighter note, Fried likes to point out impressive strides in technology that have profound implications for the air cargo industry. “For example, American Airlines is now experimenting with tag-free baggage handling where optical recognition technology recognizes the passenger luggage, regardless of its labeling or similarity to others,” he says. “If successful and fully implemented, think of its implications and uses within the air cargo system.”

Of course, no discussion of air cargo can be complete without acknowledging the impact Amazon is having on current plans and business practices.

“In the freight forwarding industry, today’s competitor can also be tomorrow’s partner, so we’re eagerly waiting for Amazon’s future to unfold,” says Fried. “However, AfA members are investing in their futures through technology enhancements, increasing global footprints and expanding service capabilities. It’s a big market and many participants will do very well—regardless of Amazon’s plans.”

Read the feature article on the 2019 State of Logistics here.

About the Author

Patrick Burnson, Executive Editor
Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at [ protected]

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