at a glance
This article looks at the latest trends and the fastest-growing sectors in international airfreight.
Capacity concerns are as troublesome to shippers using international airfreight as they are in all other transportation modes. Equally disconcerting to shippers is that even before the recent speculation that oil could reach $50 a barrel, the airline industry was already looking to pay $8 billion more in fuel costs in 2004 than in 2003. Rising fuel prices, of course, affect all modes of transport and create dislocations as the market adjusts.
And yet, amid reports that some major airlines (Delta Airlines and Northwest Airlines, to name two) are planning to trim pilots' salaries to reduce costs, the overall outlook is surprisingly good — global airfreight has begun and is sustaining growth that will continue throughout the year and into 2005.
According to Daniel Fernandez, secretary general of The International Air Cargo Association (TIACA), if we use 2000 as the base year, air cargo traffic on major trade lanes grew by approximately 1.3% in 2003. This was led, he says, by strong growth in the intra-Asian and trans-Pacific markets. While the war in Iraq conflict and the SARS outbreak had a detrimental impact on traffic growth during the first half of 2003, “all indications point to a broad recovery throughout 2004,” Fernandez says.
Fernandez relies on figures furnished by aerospace giant Boeing Co. for some of his conclusions. According to Boeing, world air cargo traffic grew by 10.7% during the first five months of 2004 compared to the same period in 2003. In line with these findings, major U.S. airlines have reported increases of from 8% to 13% in their cargo revenue for the second quarter of 2004.
Indeed, there are encouraging signs from all quarters. For instance, Germany's 19 international airports have reported that their cargo volumes increased by 12.2% for the first half of 2004.
As a result of this growth, Fernandez is seeing main deck long-haul capacity becoming scarce, even in advance of the peak season. Tempering bullish predictions, however, are factors like fuel costs, terrorism and political instability that cause skittishness among consumers and have an adverse affect on economic growth. So shippers expecting clear skies ahead need to temper their optimism with caution.
Security plays a major part in international airfreight, just as it does in all other modes. “Security in international trade transactions should be based on end-to-end multi-modal supply chain systems rather than on sporadic, isolated single modal activities,” Fernandez observes.
Fernandez gives high marks to the U.S. Transportation Security Agency (TSA) for working closely with industry groups like TIACA while evaluating the feasibility of physically screening 100% of all air cargo — certainly a politically charged issue. “The TSA rightfully concluded that the limitations of existing technology and infrastructure make this impossible,” he says. “The economic cost resulting from the disruption of commerce makes it unthinkable. The industry must remain on guard against the threat of unreasonable security measures.”
In regard to governmental concerns and regulations, the U.S. Bureau of Customs & Border Protection (CBP) has set December 13, 2004, as the final date for full implementation of the Air Automated Manifest System (Air AMS). The CBP-approved electronic data interchange system requires transmission of inbound air cargo data.
According to the CBP-published schedule, ports in three areas of the U.S. must use Air AMS. The first group deadline was August 15, with October 13 and December 13 groups to follow.
Citing Boeing's figures for the first five months of this year, Fernandez notes that the trans-Pacific corridor is experiencing the most growth, being up 17.3% over the same period last year. The next best air cargo market is intra-Asia, with 13.9% growth, followed by Latin America-North America (13.8%) and Asia-Europe (12.9%).
Fernandez observes a move away from international airfreight being carried in passenger plane holds. “As has been forecast for some time, there continues to be a gradual increase of freighter capacity relative to lower-hold,” he notes, “reflecting higher 20-year air cargo traffic growth (6.2%) than passenger (5.2%), and also significant advantages of freighter service in terms of reliability, timing and so forth. These factors offset the proliferation of wide-body passenger airplanes — such as the 777 and A340 — that have large lower-holds with the ability to fly full payloads on long routes.”
According to the Airfreight Development Index (AirDeX) developed by Lufthansa Cargo, with the assistance of Merge Global, the Asian airfreight market will continue to be strong, with India and Korea out ahead. Japan, however, will be unable to maintain its early-2004 increases through the remainder of the year.
The AirDeX issues projections based on economic data with the strongest influence on the airfreight market, i.e., gross domestic product (GDP), exports and imports, industrial production and new orders.
While Lufthansa predicts a worldwide growth of 5.9% for international airfreight, growth for the U.S. is pegged at 3.4%. Overall, an annual growth rate of 5.3% is predicted from 2005 through 2010.
Lufthansa's figures indicate five predominant commodity groups making up almost half of all international airfreight: perishables (11.2%), construction & engineering (11.0%), textiles & apparel (10.4%), postage & low value adjustments (9.4%) and computers, peripherals & spare parts (7.4%).
The statistics in the accompanying international air cargo charts indicate actual freight tonnage for the past year, and look at the top five airfreight carriers per geographical region. The charts were developed by our sister publication, Air Transport World. LT