The future for cheap air freight

With falling operating costs, the removal of the fuel surcharge for unprecedented periods and the continuous addition of capacity, air freight has arguably never been more affordable. 

What does the future look like for this critical freight mode and what challenges will it face.

Cargo business generates 10% of airline revenues, but this figure has been falling as yields have softened due to excess capacity.

In 2015, airlines transported 51.3 million metric tons of goods, representing more than 35% of global trade by value but less than 1% of world trade by volume. That is equivalent to £5.6 trillion worth of goods annually, or £15.3 billion worth of goods every day.

IATA is the trade association representing approximately 250 commercial airlines worldwide, accounting for more than 84% of total air traffic. IATA’s mission is to represent, lead and serve the airline industry.

IATA believe that the air cargo outlook for the next five years is positive, though rates are likely to remain under pressure, with additional capacity and depressed fuel prices continuing their drag on revenue performance. Though this effect is lessening now with rising fuel prices.

The trend of accelerating growth and confidence in air cargo in 2014, was halved the following year with air freight growth slowing to 2.2% in 2015.

After a strong start, air freight volumes began a decline that continued through most of 2015, until some improvements to world trade drove a modest pick-up late in the year. Cargo in Asia-Pacific, accounting for around 39% of freight traffic, expanded by a moderate 2.3%. The key markets of Europe and North America, which between them comprise around 43% of total cargo traffic, were basically flat in 2015.

IATA’s expectations on volumes remain optimistic, with solid but not spectacular growth, with an average growth rate of 4.1% per annum.

Emerging markets and regions are expected to deliver the fastest growth in air cargo volumes over the next five years, led by the Middle East and Africa.

Strongest forecasted growth is foreseen on trade lanes between Asia and the Middle East, within the Middle East region, and between North and South America.

Growth in mature markets of the North Atlantic and within Europe had been expected to be well below the global average but is showing signs of picking up. Too soon to be optimistic?……….