Air cargo’s lost US$16bn in annual revenue
THE worldwide air cargo industry has lost US$16bn in annual revenue earnings in five years.
In 2011, total air cargo revenue peaked at $67bn, but by 2016, turnover is likely to have slumped to $51bn. In revenue terms, this means the business has shrunk by around a quarter, writes Thelma Etim.
Sluggish demand and a world trade slowdown, volatile oil prices, modal shift, incongruous pricing/rates, along with China’s altered circumstances, have all contributed to the sector’s dramatic downfall in the period.
Tony Tyler, director general of the International Air Transport Association (IATA), admits 2015 was another ‘very difficult year’ for air cargo, with growth slowing and revenue falling.
“In 2011 air cargo revenue peaked at $67bn. In 2016 we are not expecting revenue to exceed $51bn,” he reveals.
IATA figures show global airfreight volumes measured in freight tonne kilometers (FTKs) expanded 2.2 per cent only last year, compared with the five per cent recorded 2014.
Cargo in Asia-Pacific – accounting for around 39 per cent of freight traffic – expanded by a moderate 2.3 per cent.
The key markets of Europe and North America, which between them comprise about 43 per cent of total cargo traffic, were basically flat last year, the figures reveal.
Whilst Middle East volumes grew strongly – up 11.3 per cent – and Africa enjoyed a modest growth of 1.2 per cent, Latin America suffered a steep decline (-6.0 per cent), a statement says.
Last year, the freight load factor was, at times, the lowest for some years, falling to an average 44.1 per cent compared with 45.7 per cent in 2014 – driven down by weak demand and capacity expansion.
“Efficiency gains are critical as the sector adjusts to shortening global supply chains and ever more competitive market conditions,” observes Tyler.
“We have to adjust to the ‘new normal’ of cargo growing in line with general rates of economic expansion.”
Regional analysis in detail
The global freight growth rate in December was 0.8 per cent compared to December 2014. Within that range there were considerable regional fluctuations.
African airlines FTKs declined by 8.4 per cent in December although for 2015 as a whole the region grew by 1.2 per cent. The FLF in 2015 was 29.7 per cent, the lowest of any region. The underperformance of the Nigerian and South African economies was a challenge throughout the year, but trade growth to and from the region was sufficient to drive a modest expansion in FTKs.
Asia-Pacific carriers were basically flat in December, expanding just 0.1per cent. For the whole of 2015, the region grew 2.3per cent. The FLF for 2015 was 53.9per cent, the highest of any region. Cargo expansion in the region has been hampered by a shift in Chinese economic policy to favour domestic consumption. A mid-year fall of 8per cent in trade to/from emerging Asia also led to declines but this appears to have bottomed out, with a rebound in the second half of the year.
European airlines grew by 1.2per cent in December but the performance for 2015 in total was a fall of 0.1 per cent compared to 2014. The FLF in 2015 was 44.9 per cent. Economic conditions in the Eurozone have been subdued, leading to suppressed demand for airfreight, but imports have improved in recent months.
Latin American carriers continued the weak performance of recent months, declining by 6.2 per cent in December and by 6.0 per cent for 2015 as a whole. This was the weakest performance of any region. The average FLF for 2015 was 38.3per cent. Economic and political conditions in Brazil have worsened, and regional trade activity has been volatile.
Middle Eastern carriers grew 4.0 per cent in December and for 2015 in total the region expanded 11.3 per cent compared to 2014. The FLF was 42.8 per cent for 2015. The region enjoyed a strong year as network expansion into emerging markets was supported by economic growth in local economies. Political instability and the fall in the oil price may impact on some economies in the region but growth as a whole remains robust enough to support further expansion in 2016.
North American airlines saw FTKs expand 1.4 per cent in December compared to December 2014. For the year as a whole, North America grew just 0.1 per cent. The 2015 FLF was 34.3 per cent. Growth in 2015 faded after a strong start that was flattered by the West Coast ports strike. Recently there have been mixed signals from economic data, indicating an uncertain outlook for airfreight in the coming months.