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TIACA chairman warns against ordering freighters as recession looms

CHAIRMAN of The International Air Cargo Association (TIACA) Sebastiaan Scholte has issued a warning during his year-end message to urge the industry not to order more freighter aircraft that would be delivered during potentially the next major economic downturn.

In his comments that were first posted on the online publishing platform Medium.com, Mr Scholte noted that although freighters represent just eight per cent of the global fleet, they carry half of the air cargo volumes worldwide.

"Almost 85 per cent of the wide body freighters ordered have been delivered. Integrators are responsible for around 70 per cent of the freighter orders," he said.

"This implies that the extra freighter capacity on order unlikely will satisfy the extra demand for capacity."

"Even if freighters are now ordered, the delivery will be years later, when the economic outlook will be questionable," he said. "In the meantime, load factor improvements can only capture a part of the growth. If the growth continues, demand will outpace supply, forcing prices to go up.

"Hopefully we will not repeat the traditional 'big cycle', where freighters are ordered in boom times to be delivered when there is an economic downturn," said Mr Scholte.

History has shown, Mr Scholte said, that the global economy experiences a recession every eight to 10 years. The last big recession was in 2009.

"Recessions usually start when interest rates are raised too far and fast to try to avoid overheating of the economy," he explained. "Hopefully central banks will raise rates gradually and by not too much. Higher interest rates can lead to lower stock prices and default of heavy indebted companies and governments.

"At the same time, higher interest rates will make the cost of inventories higher which could benefit air over sea freight."

Mr Scholte called for the entire air cargo supply chain to invest in "much needed innovation, especially in digitisation".