Air Cargo: Where Does It Go from Here?

Last year seems placid when compared to the situation this year for the world's air cargo carriers. Though projections are that business will improve in the long term, that time may not come soon enough to save some from going out of business. A case in point is Dulles, VA-based Gemini Air Cargo that ceased all operations in mid-August. The carrier had offered airport-to-airport capacity for cargo customers and filled some freight lift needs for other airlines, such as Lufthansa, FedEx, British Airways and others. It had spent two separate stints in Bankruptcy court within the past two years. Unable to find a buyer it began liquidation proceedings.

Looking at the present landscape, Giovani Bisignani, director general and CEO of the International Air Transport Association (IATA), observed that airlines are experiencing a “perfect storm” of uncontrollable fuel costs and falling demand. “Airlines could lose as much as US$6.1 billion this year,” he claims. “Already some 25 airlines in our financial systems have gone bust — greater than immediately following 9/11 — and we are bracing for more. Despite some relief in the oil price, we are a fragile industry that is in a crisis. ‘Wait-and-see’ is not an option. Major changes are needed.”

As the statistics here indicate, last year saw the beginning of a slowdown in the movement of cargo by air. A few airlines in what had been strong growth markets began to show the influence of a slowing international economy and growing costs for fuel. That said according to IATA all airlines — including both passenger and freight income — enjoyed a profit of US$5.6 billion in 2007.

If current statistics are indicators and will hold for the balance of the year, freight volumes will decline. Through June, according to IATA, international freight traffic fell by 0.8%, which is noteworthy in that it is the first decline since May 2005. African airlines were off -1/9% in June 2008, compared to 2007. Asian/Pacific airlines saw June traffic fall, at -4.8%. Hardest hit in June were Latin American carriers who experienced a -12.7% decline. While European airlines freight had grown 1.4% in May that slipped to just 0.7% in June. North American freight grew 4.0% in June, down from May's 4.6% growth.

“With consumer and business confidence falling and sky-high oil prices, the situation will get a lot worse,” predicts Bisignani.

The World's Top 25 Cargo Airlines 2007
Rank Airline FTKs (mil.)
1 FedEx 15,985
2 Air France KLM 11,365
3 UPS Airlines 9,930
4 Korean Air 9,678
5 Lufthansa 8,451
6 Singapore Airlines 8,029
7 Cathay Pacific 7,340
8 China Airlines 6,299
9 Cargolux 5,512
10 Atlas Air 5,387
11 British Airways 4,891
12 EVA Air 4,784
13 JAL Group 4,773
14 Air China 3,686
15 Asiana Airlines 3,558
16 American Airlines 3,108
17 Northwest Airlines 3,018
18 United Airlines 2,937
19 LAN Airlines 2,702
20 Malaysia Airlines 2,633
21 China Eastern 2,614
22 Qantas 2,561
23 Thai Airways Int'l 2,456
24 Kalitta Air 1,982
25 China Southern 1,973
Source: Air Transport World

The World's Largest Air Cargo Carriers

By region, here are the top carriers of air freight for 2007. These are composite figures, including freight that moved in the bellies of passenger planes and in dedicated freight aircraft.

An FTK (freight tonne kilometer) is 1 tonne of cargo carried 1 kilometer. It is a worldwide standard of measure for the amount of freight traffic moved. Changes shown in percentages are those of 2007 compared to 2006.

Outsourced Logistics is indebted to its sister publication, Air Transport World, for sharing the data for this report.

Airline FTKs (millions) % Change 2007/2006
Africa/Middle East
Qatar Airways 1,328 46.7
Saudi Arabian Airlines 1,238 15.3
South African Airways 937 -23.7
El Al 897 - 0.8
Gulf Air 598 -25.6
Asia/Pacific
Korean Air 9,678 9.3
Singapore Airlines 8,029 - 1.0
Cathay Pacific 7,340 3.4
China Airlines 6,299 0.1
EVA Air 4,784 - 7.2
Europe
Air France/KLM 11,365 3.4
Lufthansa 8,451 4.3
Cargolux 5,512 4.6
British Airways 4,891 4.2
Alitalia 1,707 15.9
Latin America/Caribbean
LAN Airlines 2,702 4.8
Varig Log 695 29.5
LanChile Cargo 623 25.8
Aeromexico 156 19.8
Avianca 142 16.5
North America
FedEx 15,985 4.0
UPS Airlines 9,930 8.5
Atlas Air 5,387 -2.2
American Airlines 3,108 -4.6
Northwest Airlines 3,018 -8.9

Boeing is Bullish on the Future

In its most recent long range forecast, Boeing Co. projects the global air cargo market to enjoy strong long-term growth. Over the next 20 years the aircraft manufacturer says the industry will grow at an annual rate of 5.8% and the world's freighter fleet will grow from the present 1,948 planes to 3,892.

“The forecast is based on a number of factors, most significantly economic growth in diverse areas of the world,” claims Jim Edgar, regional director, Boeing's Cargo Marketing for Asia. “Over the long-term, global economic growth will drive demand for new, high-value products as well as seasonal perishables that people have become accustomed to enjoying.”

Impetus leading to orders for new equipment include needs for more efficient and reliable planes. Environmental concerns for regulation of aircraft emissions and noise have added to ongoing problems that come with normal aging of equipment.

Most additions to the world's cargo fleet will be widebody freighters that are projected to comprise 60% of the additions. Large freighters presently are 61% of the current fleet and are expected by Boeing to be 65% of the 2007 fleet.

We expect several trends to continue,” notes Edgar. “Dedicated freighters will continue to provide an increasing proportion of air cargo capacity, going to nearly 54%; and the industry will continue to move to larger airplanes. Additionally, freighters will continue to comprise about 10% of the world jetliner fleet during the forecast period.”

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