STATEMENTS & INTERVIEWS
"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
BOEING: World Air Cargo Forecast
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.