Challenges for air cargo

The air freight sector must beware of complacency, facing new threats and with recent improvements in volumes and yields limited to certain markets, according the chief economist for IATA.

Brian Pearce told delegates at Iata’s World Cargo Symposium in Vancouver: “There has been a strong bounce-back in some markets, such as developing economies.

“But it’s a different story in developed economies, particularly in Europe, where economic activity is still very flat.”

Air freight rates have, in places, returned to the levels they were at 12 months ago, he said, and had seen higher growth than ocean rates, but it had taken around 160 freighters leaving the market to bring about the revival in load factors and rates.

“But poor asset utilisation and more capacity being delivered means we are not out of the woods in terms of cargo rates,” he said.

Pearce warned that the global economy was still facing major challenges that threatened the future profitability of air freight.

“The price of a massive rescue package in sluggish western economies was a massive budget deficit – and we will face higher taxes to pay for that, so growth in those economies will be slower,” he said.

“Fuel prices are also starting to rise, and environmental policies will also add to costs.”

He added that the sector also still faced structural challenges in terms of how to turn market growth into profitability.

David Hoppin, managing partner of Merge Global consultancy, added further gloom.

“Two-thirds of GDP in the US comes from consumers, and we think consumer psychology has changed,” he said. “We think there’s a strong possibility of a double-dip recession.”

However, Ram Menen, divisional senior VP of cargo for Emirates.disagreed.

“The strength of the economy is better than I thought it would be,” he said.

“We will see a shift into the consumer markets of China and India, which are strengthening with a new set of consumers who are young with a disposable income.”

But Des Vertannes, head of Etihad Cargo, took a more cautious stance.

“Air freight has benefited from limited ocean capacity, and inventory replenishment continues to be far more controlled,” he said.

“But the threat of unemployment prevails, and banks are still not lending – that’s a critical area.”
Source IFW