"Air cargo is vital to the global economy, transporting more than $5 trillion worth of goods annually, or more than a third of world trade by value. And for airlines, it accounts for about 12% of industry revenues."

Tony Tyler, IATA's Director General and CEO

Priorities for Air Cargo

12 March 2013 (Doha) - The International Air Transport Association (IATA) called on airlines and their partners in the air cargo supply chain to work together to make air cargo more competitive and address the challenges of safety, security and sustainability.

The International Air Transport Association (IATA) called on airlines and their partners in the air cargo supply chain to work together to make air cargo more competitive and address the challenges of safety, security and sustainability. "Air cargo is vital to the global economy, transporting more than $5 trillion worth of goods annually, or more than a third of world trade by value. And for airlines, it accounts for about 12% of industry revenues. But, like the rest of the airline industry, air cargo is a tough business. The last two years have been particularly difficult. Last year saw a 2% decline in both air cargo demand and yields. There are early signs that an upturn is on the way. To seize the opportunity we must strengthen the industry's competitiveness," said Tony Tyler, IATA's Director General and CEO. Speaking at the World Cargo Symposium in Doha, Qatar, Tyler outlined key industry priorities: 

Modernize processes: Transitioning to a paperless operating environment is critical to improving air cargo's competitiveness. The Global Air Cargo Advisory Group (GACAG) endorsed an e-Freight roadmap that reflects agreement on roles and responsibilities for pushing this critical project forward. IATA is committed to implementing the e-Air Waybill (e-AWB)--targeting 20% implementation by the end of 2013 and 100% by the end of 2015. The International Federation of Freight Forwarders (FIATA) and the Global Shippers Forum have agreed to push forward the digitalization of other freight documents. The e-AWB penetration was 6.8% at the end of 2012. "Our e-AWB targets are ambitious. The establishment of the Multilateral e-AWB Agreement will play an important role in boosting implementation. And we have the success stories of several airlines which have implemented 100% e-AWB policies in their hub markets proving that progress is possible," said Tyler. The industry is also working with governments for the progressive adoption and implementation of the Montreal Convention 1999 (MC99) which provides the legal framework for electronic documentation. 

Secure the supply chain: IATA called on governments to implement mutually-recognized secure supply chain regimes. The Secure Freight initiative championed by IATA is an example of a supply chain framework which is being piloted in eight locations worldwide. The first was Malaysia where studies have estimated that Secure Freight also brings an economic benefit of $1-$2 billion over five years. "Air cargo is a global network. We need a risk-based approach with states mutually recognizing their security regimes," said Tyler. He noted progress with the US Air Cargo Advanced Screening (ACAS) program, the EU's Air Cargo or Mail Carrier operating into the European Union from a Third Country Airport ( ACC3) security directive and the e-Cargo Security Declaration (e-CSD). 

Ensure that dangerous goods regulations are followed: Safety is the industry's top priority. Recent concerns over lithium batteries transported as air cargo have reinforced the need for greater education and communication over the rules for shipping these items. "We don't need more regulation. But we need to ensure that the regulations we have are followed. With over 50 million tonnes of cargo transported by air annually, it is a big challenge. And this is being made even bigger as the number of shippers proliferates--particularly with the growth of e-commerce," said Tyler. 

Focus on environmental sustainability: "The ability to manage our carbon emissions is our license to grow. That is why we are committed--as an industry--to improving fuel efficiency by 1.5% annually to 2020, capping CO2 emissions from 2020 with carbon-neutral growth (CNG2020) and cutting net emissions in half by 2050 compared to 2005. No other global industry has made such commitments. And the strategy to achieve these is agreed and clear--focusing on technology, operations, infrastructure and positive economic measures," said Tyler. 

2013 is a crucial year for aviation. The International Civil Aviation Organization is leading efforts to develop a global solution for the market-based measures (MBMs) needed to help aviation reach its CNG2020 goal. "Finding agreement among governments on a global approach will not be easy. The industry is united and doing all that it can to help. At the direction of our Board of Governors we are working through our governance processes to achieve an industry agreement on how to share the burden of CNG2020. And the efforts of the cargo community to develop a common carbon calculator will assist in the dialogue and further the transparency that is a cornerstone of our approach to sustainability. And we continue to remind governments that their role extends beyond MBMs. Their role in supporting initiatives such as implementing the Single European Sky and the commercialization of sustainable biofuels for aviation is critical to the industry's long-term sustainability," said Tyler. 

"Air cargo plays a critical role in driving economic growth and development. This is not always fully appreciated by governments. That is why it is essential that the supply chain speaks with a single voice to articulate policies that support its success. I hope that GACAG will facilitate a joint action plan to focus on persuading key governments of the need to put cargo at the heart of their economic strategies," said Tyler. 

Tyler also announced that work with FIATA to modernize the Cargo Agency Program, which will put the airline-freight forwarder relationship on a stronger footing, was making good progress. A series of proposals will be submitted to the Cargo Agency Conference later in the year. "These will help the program to reflect the reality of the principal-to-principal relationship that exists in over 70% of transactions performed between airlines and their forwarding partners. And it reflects the changing rules and obligations linked to liabilities between the partners," said Tyler. -IATA- 

BOEING: World Air Cargo Forecast

Executive Summary

Air cargo traffic contracted slightly in 2011 and 2012 After rebounding sharply in 2010 from the depressed levels of 2009, demand for air cargo transport began to weaken in early 2011, sliding into contraction by May of that year. The slide continued into the first 8 months of 2012, with year-to-date traffic down 2%. Despite the near-term slowdown, world air cargo traffic will more than double over the next 20 years, compared to 2011 levels, for an average 5.2% annual growth rate. The number of airplanes in the freighter fleet will increase by more than 80% over the next two decades.

In 2011, world air cargo traffic declined about 1.0%, after expanding 18.5% in 2010. This exaggerated expansion reflects a normal recovery from the precipitous drop in cargo traffic during 2008 and 2009, when traffic fell 3.2% and 9.6%, respectively—the first time that air cargo traffic contracted in two consecutive years. If the current decline continues through the remainder of 2012, however, the years 2011 and 2012 will mark the second such occurrence. World air cargo traffic has expanded only 3.7% per year on average since 2001. Of greater concern, traffic has grown only 2.0% per year since 2004—much slower than the 6.7% historical growth trend maintained for the 23 years between 1981 and 2004. The slowing of world air cargo traffic since 2004 can largely be attributed to the global economic downturn of 2008–2009 and the rising price of fuel.

The global economic downturn of 2008 and 2009, the worst economic contraction since the Great Depression, dragged down all modes of transport. Statistics for world seaports show that container handling fell 9.7% in 2009, prompting containership lines to cut services, reduce frequencies, and idle ships on a global scale for the first time on record. Air cargo traffic fell 12.5% between mid-2008 and year-end 2009, the worst decline since the beginning of the jet transport age. By mid-2009, however, worldwide industrial production began to perk up, nudging air cargo traffic toward recovery. Air cargo surged in 2010 as world industry moved to restock depleted inventories.

Growth continued during the first quarter of 2011, expanding an estimated 4.5% compared to first quarter 2010, after peaking at a level not seen since 2007. But starting in June 2010, jet fuel prices were on the rise, climbing 42% by December 2011. This contributed significantly to an air cargo traffic slowdown that was aggravated by the civil unrest of the Arab Spring uprisings, the Japan (“Tohoku”) earthquake, and flooding in Thailand. The latter two exogenous shocks disrupted manufacture of automobile components and information technology (IT) goods, both of which are key commodity groups for air cargo.

Rising fuel prices have been a factor in air cargo traffic slowdowns since late 2004, diverting air cargo to road transport and maritime modes, which are less sensitive to fuel costs. The price of jet fuel has tripled over the past 8 years, and prices are likely to remain volatile as the threat of supply disruptions persists. In the near term, high unemployment in developed economies, tight fiscal policy in Europe and the United States, and overall restrained consumer spending will also dampen air cargo growth. On a positive note, however, oil and jet fuel prices are forecast to remain around mid-2012 levels or, in some scenarios, even decline over the next 3 to 5 years. Economic activity, as measured by world GDP, remains the primary driver of air cargo traffic growth. World economic growth averaging 3.2% over the next 20 years, coupled with the forecasted stable fuel prices, will help air cargo traffic grow. Freight yields have declined at an average rate of 4.2% per year over the past 20 years. Continuing profit challenges at passenger airlines have focused airline attention on opportunities to earn lower-hold cargo revenue. On average, cargo revenue represents approximately 15% of total air transport revenue, with some airlines earning nearly 40% of their revenue from cargo.

Declines in yield for cargo and passenger services reflect productivity gains, technical improvements, and intense competition. While declining yield creates pricing pressure on all industry segments, it also helps stimulate growth for the industry by enabling lower shipping costs for the consumer. Averaged over the past two decades, freight yield has declined 4.2% per year. The most recent decade saw a slight yield increase of 0.9% per year, compared to the 9.0% average annual decline recorded in the preceding decade. Freight yield diverged from the 20-year downward trend between 2002 and 2008, increasing approximately 4.1% per year during that 6-year period. Much of the increase is due to fuel and security surcharges that began to rise in 2003. In 2008, significant fuel surcharges imposed in response to the fuel crisis helped push yields up 15.4% compared to 2007. Although the global economic downturn drove freight yields down 22.1% in 2009, yields rose steeply by 11.9% when cargo traffic rebounded in 2010. In 2011, total cargo capacity increased while demand stayed nearly flat, holding yield growth to slightly more than 1%.

The higher cost of shipping by air held world air cargo traffic growth to only 3.7% averaged over the past 10 years—well below the historical trend. Industrywide freight yields are expected to return to the historical downward trend as more efficient airplanes enter the market, helping to stimulate market growth. Over the next 20 years, world air cargo traffic will grow 5.2% per year. Air freight, including express traffic, will average 5.3% annual growth, measured in RTKs. Air mail traffic will grow much more slowly, averaging only 0.9% annual growth through 2031. Overall, world air cargo traffic will increase from 202.4 billion RTKs in 2011 (down from its 2010 record of 204.2 billion RTKs) to more than 558.3 billion RTKs in 2031.

Asia will continue to lead the world air cargo industry in average annual growth rates, with domestic China and intra-Asia markets expanding 8.0% and 6.9% per year, respectively. Latin America markets with North America and with Europe will grow at approximately the world average growth rate, as will Middle East markets with Europe. The more mature North America and Europe markets reflect slower and thus lower-than-average traffic growth rates.

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