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Air cargo heading for another solid year in 2018

AIR cargo growth is expected to slow with some potential challenges ahead, but the industry is still poised to have another "solid" year in 2018, according to IATA's chief economist Brian Peare.

Speaking at the IATA Cargo Media Day in Geneva, Mr Pearce said he expected e-commerce and inventory restocking to drive "good growth" in cargo revenues of 9 per cent in 2018 to US$59.2 billion.

This is below the 15 per cent improvement in revenues registered in 2017, but still "another year of solid growth".

The improvement in revenues will be driven by a predicted 4.5 per cent year-on-year improvement in cargo carried to 62.5 million tonnes in 2018 and a yield improvement of 4 per cent, the London's Air Cargo News reported.

The volume and yield improvement also lag behind 2017 figures, which stood at 9.3 per cent and 5 per cent respectively.

Growth in 2017 was driven by a general improvement in world trade, inventory restocking and the growth of e-commerce, which is expected to support continued momentum beyond the rate of expansion of world trade in 2018.

However, Mr Pearce said that the restocking cycle was beginning to wain and this would contribute to the slowdown in demand growth in 2018.

"The latest data we have has seen a slowdown in the growth of freight tonne kms, so I think we are at the peak of growth rates. I think the question is, are we going to see a very sharp slowdown or something gentler. At the moment it looks like something gentler."

He explained that when airfreight had benefitted from inventory restocking in the past, such as 2010-2011, there tended to be a sharp downturn when the cycle had passed.

This time, the industry was supported by growth in e-commerce. "E-commerce is a structural change in retailing that is really starting to benefit the air cargo business, whereas if we look at the traditional cross border trade in goods, you can see it has been growing very slowly until relatively recently."

He added that improvements in air cargo demand were being felt much more evenly than in the past, with all areas of the world showing growth and certain backhaul trades, such as Europe-Asia, also registering improvements.

Profitability had also been helped by improvements in air cargo load factors, Mr Pearce added.

"Over the last 18 months traffic has been growing faster than capacity. Capacity is actually slowing as we have passed the peak of freighter deliveries. In fact, freighter capacity has been fairly flat and that has been very positive for the cargo business because it has allowed a substantial improvement in the utilisation of freighters."

However, Mr Pearce admitted that there were some clouds on the horizon that could threaten growth, although these were hard to predict.

"In the airline industry, particularly on the travel side, we tend to have eight year cycles that end in a downturn," he said.

"Those cycles have never been ended by anything regular, it has been a shock - a 9/11 or a global financial crisis. We can never say what the next shock will be, but there will be another shock."

Mr Pearce said protectionism was another threat to the growth of air cargo. "We seem to have avoided tariff wars, although they are still be threatened in some quarters," he said.

"What we have seen is the new localism. It is soft protectionism. We are seeing governments, perhaps for good reason, looking at their own industrial policies and looking at supporting and protecting their own companies. As an industry we depend on open borders and trade facilitation initiatives are an important part of addressing some of these problems."