Air Cargo Upswing on the Horizon

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. While industry stakeholders innovate to create specialised capabilities to shipping goods across different business verticals thus opening an opportunit to enhance yields; the consensus is that the current challenges are going to be there for some time but an upswing is certainly son the horizon.

- Shreya Bhattacharya & Reji John

There are several factors that indicate air cargo market could soon be on the upswing even though the current challenges of over capacity and falling yields are market realities that the industry has to live with for some time.

According to the International Air Transport Association (IATA), there is some optimism over the prospects for the cargo business in 2017. The break in falling yields and a moderate uptick in demand (3.5 percent) will see cargo industry volumes reach a record high of 55.7 million tonnes (up from 53.9 million tonnes in 2016). Industry revenues are expected to rise slightly to $49.4 billion, which is still well below the $60 billion level of annual revenues experienced in 2010-2014.

Take for instance in October last year, UPS signaled an increased appetite for cargo aircraft, submitting an order to Boeing for 14 747-8 freighters, with the option to purchase an additional 14 over the next three years. UPS officials said the purchases will let the integrator upgrade offerings on current routes, but they also left the door open to using the extra capacity in new markets.

However, there are equally compelling factors that should keep the global air cargo industry on tenterhooks about the expected turnaround. Current slowdown in global trade, geo political concerns and the threat of protectionism pose risks to global trade thus impacting the prospects of air cargo industry.

Alexandre de Juniac, IATA’s director general and chief executive said that world trade is still sluggish, so air cargo is by no means flying easy. “Growth is the way to overcome the world’s current economic challenges,” Juniac said. “The EU-Canada agreement is a welcome respite from the current protectionist rhetoric and positive results should soon be evident. Governments everywhere should take note and move in the same direction.”