Randy Tinseth, vice president of marketing at Boeing Commercial Airplanes, confirmed what his audience at TIACA’s Air Cargo Forum already knew: the cargo market “has been a tough marketplace,” he said.

“Over the last six years, the world economy has grown below expectations. Not only has GDP growth underperformed, but trade and industrial production has also lagged behind. This has resulted in a slow-growing cargo market.”

Tinseth went on to explain that although GDP growth may have been relatively constant, trade growth has fluctuated widely, and this corresponds closely with cargo demand. Forecasting a medium-term trade growth rate of approximately 4% by 2020, Tinseth expected cargo growth to also grow by about 4%.

With an expected faster expansion of passenger routes, Tinseth forecast that the industry will continue to see a shift from maindeck to bellyhold cargo. One of the challenges, though, is that the growth in bellyhold capacity will not always match where cargo demand is. “There are passenger markets, there are freighter markets, and there are markets that support both,” Tinseth said. “For the growth in bellyhold capacity to be utilized, it has to go into markets that see both passenger and cargo growth.”

Over the past five years, bellyhold capacity has grown by 25%, said Tinseth, but only about 30% of this increased capacity has gone into markets which have also seen cargo growth.

Growth has not been even though, explained Marco Bloemen, senior vice president for the Seabury Group. High-tech cargo shipments have declined by 7% so far this year, but perishable shipments have grown 8%. Express shipments are still growing by 5% a year, and international mail by 11%, although from a low base, he said. Bloemen expects belly capacity to grow by 5-6% over the next 10 years, as passenger numbers increase. The big question, he said, is how to cater for this capacity if cargo volumes on these routes are not rising by as much.

New planes with larger belly capacity than the ones they will replace mean that belly capacity will increase significantly, said Oliver von Tronchin, head of freight marketing at Airbus. This capacity will be used ahead of freighter capacity, he went on to say. To be competitive, cargo airlines, especially combination airlines, will be using belly capacity, as it is the lowest-cost cargo capacity they have. There is still a market for freighter routes, but he believes that the percentage of cargo carried as bellyhold capacity will increase.

However, Tinseth said that at present, only 30-40% of belly capacity is being utilized today. If growth in bellyhold capacity is in markets which do not have strong cargo demand, this capacity is going to be difficult to fill. “If you are flying into a cargo market with a passenger plane, you fill the lower hold. When you fly it in to a non-cargo market, it’s empty.”

Bloemen went on to say that with so much capacity on some routes about to come online, there may be opportunities to stimulate demand. More can be done to sell smarter, he said.

Express is expected to grow considerably, and will take market share away from general cargo. E-commerce is currently being driven by domestic demand, which may slow the entry of express operators into the top 10 cargo carriers, but if the likes of Amazon find they can do things better than traditional carriers, they will get there. Embracing e-commerce can certainly help cargo carriers, but carriers will also have to focus on markets that are growing, such as perishables and pharma.

The most fundamental changes will come from the way customers and carriers are working, said Matthieu Pélissié du Rausas, a senior partner with McKinsey & Co. Lower growth in demand will mean the development of new product networks and associated supply chains; there will be increased productivity on the cargo supply side due to automation and robotics; and increased regulations will affect the industry. “The air cargo industry will need to focus on agility, speed and alliances to win in this new world,” he said.

By Darren Barton

Asia Cargo News | Paris