CSCMP's Supply Chain Quarterly
December 09, 2018
Forward Thinking

Global air cargo traffic will grow at a rate that's well ahead of earlier forecasts, IATA says

Growth rate of 7.5 percent to outstrip original forecast by 4 percentage points, group says.

Worldwide air cargo traffic will grow this year by 7.5 percent over 2016 levels, as strong demand for e-commerce and pharmaceuticals drive activity well ahead of levels projected at the start of the year, the International Air Transport Association (IATA), the leading global airline trade group, said today.

Airlines worldwide will transport 58.2 million tons this year, about 4 million tons over 2016 levels and 2.5 million tons over what IATA previously forecast. The rate of year-over-year growth will be more than double the rate of increase from 2015 to 2016, and will be 4 percentage points higher than the 3.5-percent gain that IATA had originally forecast.

The projections were issued at the group's annual meeting in Cancun, Mexico. At the meeting, IATA raised its profit outlook for the entire airline industry, projecting a U.S. $31.4 billion profit, up from the $29.8 billion prior forecast, on revenue of US$743 billion, up from $736 billion.

Air cargo is thriving as inventory re-stocking patterns normally seen at the start of an economic upturn raise demand for fast-cycle air transport to get goods to market as quickly as possible, IATA said. Though the U.S. economic recovery is considered somewhat long in the tooth, economies in Europe, Asia, and parts of Latin America are believed to be in the early stages of a rebound.

In the first quarter, demand, measured in freight ton-kilometers, rose 11 percent year over year. In April, freight ton-kilometers rose 8.5 percent from 2016 levels.

The question now is whether the current upturn is sustainable. Since 2010, air cargo demand has been moribund, save for some monthly upward blips that proved to be nothing more than false starts. IATA Director General and CEO Alexandre de Juniac said air cargo has been in a "coma" for the past six years.

Separately, IATA's 275 airline members adopted a resolution to accelerate the modernization of cargo systems and processes in the wake of the signing of the World Trade Organization's "Trade Facilitation Agreement" (TFA), which IATA said would contribute $1 trillion in trade to the global economy. The four-part resolution calls for IATA to complete the multi-year task of converting information to digital formats so it can be shared instantly; adopt harmonized standards that support safe and secure operations; use improved technology that allows customers the flexibility to make changes to their shipping flows; and develop advanced analytics that could improve the industry's overall performance.

TFA, the first multilateral agreement in the WTO's 21-year history, is expected to reduce WTO members' trade costs by an average of 14.3 percent, with developing countries reaping most of the gains, according to a 2015 WTO forecast. The compact will cut 36 hours off the average time required to import goods, and two days off average export delivery times, both significant reductions from current levels, the report projected.

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