Air Cargo Supply Chains Continue to Remain Robust

While the nation's air cargo industry remains strong, several indicators suggest that demand may have passed the growth peak.

According to The International Air Transport Association (IATA), the inventory-to-sales ratio in the U.S. is “tracking sideways,” signaling that the period when companies look to restock inventories quickly—which often gives air cargo a boost—has ended.

Meanwhile, the new export orders component of the global Purchasing Managers’ Index (PMI) is stable. And the upward trend in seasonally-adjusted freight volumes has moderated.

Freight volumes are still expected to grow in 2018, although at a slower pace than in 2017.

“Demand for air freight grew by 5.9% last month,” says Alexandre de Juniac, IATA’s Director General and CEO. “And tightening supply conditions in the fourth quarter should see the air cargo industry deliver its strongest operational and financial performance since the post-global financial crisis rebound in 2010.”

Indeed, for the past 15 months demand growth has outstripped capacity growth – which is positive for load factors, yields, and financial performance.

Charles W. (Chuck) Clowdis, Jr. Managing Director of Trans-Logistics Group, Inc., observes that given the strong rebound in consumer confidence, translating into robust consumer spending, air cargo “is enjoying a very fine Holiday Season again” this year.

“As unemployment numbers have fallen, we've seen a return to higher value goods,” he says. “This is despite some refinement of the definition of ‘high-value luxury' items as defined in the past. As a consequence, the need to increase speed-to-market has played well for air cargo operators.”

Clowdis also notes that the mix of consumer goods and high-tech products has been strong and compliment the usual mix of pharmaceuticals and critical parts air shipments.

“Air cargo shippers should expect higher rates in 2018,” he adds, “so they had better develop sharper negotiating skills, commit to greater volumes, and collaborate more closely with with service providers.”

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