Cargo will significantly help the growing profitability of Asia-Pacific’s airlines in 2018 after having contributed heavily in 2017, the International Air Transport Association (IATA) told reporters at its Global Media Day on December 5.

The airline industry’s trade body is forecasting that Asia-Pacific airlines will log profits of US$8.3 billion in 2017 and US$9 billion in 2018. It is also anticipating the air cargo sector will move around a third of the value of world trade, worth some US$6.2 trillion.

“The strong cyclical rise in cargo markets has been a particular support and we forecast further above-trend growth in the region’s overall traffic of 7% in 2018,” Brian Pearce, IATA’s chief economist said.

“Strong cargo revenues – up over 15% – have been a key driver of improved financial performance in this region: its airlines carry more than 37% of air cargo,” IATA added.

The rise in freight tonne kilometres has been stronger than was anticipated in the trade body’s mid-year forecast. It is now expecting a 9.3% increase in 2017 to 59.9 million. The growth rate is more than double world trade increases of 4.3%.

Its forecast for next year should add to the end of year cheer as it is predicting revenue growth of 9% as a strong cyclical upturn in volumes combines with some recovery in yields.

One particular driver within this has been a strong restocking cycle. Or as IATA officials put it: “The cause for this has been the unexpectedly strong economic upturn, leading shippers to find that their inventories need to be restocked quickly, which has meant they turned to air transport.”

The body is, though, cautious on the long-term impact of restocking as it is a part of the cycle and therefore temporary, but noted the emerging growth of e-commerce and its reliance on air transport. This in turn lead to an IATA forecast of more above world trade growth FTK expansion in 2018 of 4.5%.

One other statistic bolstering the sector is the increasing inexpensiveness of air cargo as a service. The freight rate was US$1.61 per kilogram in 2017, statistics from the Airline Industry Economic Performance report authored by Pearce show. This looks set to rise only fractionally to US$1.62 in 2018.

While the outlook is good, there are some issues IATA flagged which overshadow the promise of the coming year.

The infrastructure crunch is starting to loom large, with the lack of slots and other airport facilities possibly damaging what is shaping up to be a good future.

To complicate things, this is a two-fold problem covering both air traffic management systems and airports. Of the former, IATA director general and CEO Alexandre de Juniac was clear about how limiting it is. “Airlines have invested in planes with amazing capabilities. But we are not able to use them fully to maximize efficiency,” he said.

Examples he gave were the slow development of the NextGen Air Transportation System in the United States and Europe’s failure to implement the Single European Sky. IATA forecasts that the delays caused by inefficient airspace management in Europe will cost airlines €3 billion (US$3.6 billion) next year.

On airports, de Juniac was much more candid. Not only are load factors at an all-time high, but the number of planes in use is expected to double in 20 years. Already stretched airport capacity will not be able to meet the expected demands of the industry.

“Airport infrastructure is not being built fast enough to cope with growth. That’s why airport slots are so important,” de Juniac said. While most of the airports coordinating slots are in Europe, he cited a number of cities in Asia and the Pacific, including Mumbai, Bangkok, Manila, Jakarta and Sydney, as being bottlenecks. “That demonstrates the scale of the problem,” he said.

What IATA wants is a three-fold response from governments, including global standards in slot allocation to use capacity more efficiently and a caution about airport privatization. But at the top of the list is more, and better, airports, and soon. This is crucial given the scale of the looming airport crunch.

“There is no time to lose. Work with the industry to plan and build the infrastructure that will be needed,” de Juniac urged governments.

By Michael Mackey

Correspondent | Geneva