Supply Chain’s Air Cargo Sector Continues to Gain Share

The International Air Transport Association (IATA) released data for global air freight markets showing that demand grew 12.7% in May 2017 compared to the year-earlier period. This was up from the 8.7% annual growth recorded in April 2017 and is more than three times higher than the five year average growth rate of 3.8%.

Furthermore, freight capacity grew by 5.2% year-on-year in May 2017.

The continued growth of air freight demand is consistent with an improvement in world trade. This, in turn, corresponds with new global export orders remaining close to a six-year high in May. There are, however, some signs that the cyclical growth period may have peaked. The global inventory-to-sales ratio, for example, has started rising. This indicates that the period when companies look to re-stock inventories quickly, which often gives air cargo a boost, has ended. Regardless of these developments, the outlook for air freight is optimistic with demand expected to grow at a robust rate of 8% during Q3 2017.

“May was another good month for air cargo. Demand growth accelerated, bolstered by strong export orders. And that outpaced capacity growth which should be positive for yields. But the industry can't afford to rest on its laurels. With indications that the cyclical growth period may have peaked, the onus is on the industry to improve its value proposition by accelerating process modernization and enhancing customer-centricity,” said Alexandre de Juniac, IATA's Director General and CEO.

Cargo volume figures released by the Association of Asia Pacific Airlines (AAPA) confirm these observations, suggesting that business conditions continued to improve across Asian economies, in turn lending support to international trade activity.

“The broad-based expansion in global economic activity, coupled with renewed demand on selected routes, particularly between Europe and Asia, has contributed to growth in long-haul markets in recent months,” says Andrew Herdman, AAPA director general. Within the same period, Asian airlines recorded a solid 9.5% increase in air cargo demand, supported by a pick-up in export orders across the region's economies.
And over the long term, it may only get better, says John Leahy, chief operating officer for Airbus.

He maintains that air traffic continues to prove its resilience to slow economic growth by outperforming global GDP, demonstrating the world's appreciation of the benefits aviation brings.

“For the next 20 years, the Airbus' Global Market Forecast predicts a 4.4% global annual air traffic growth, despite some downward revision of future economic growth by a number of forecasters in several regions of the world,” says Leahy.

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