Etihad Cargo sees pharma and e-commerce continuing to drive growth despite expectations of a more tempered air freight expansion for the aviation sector this year as the industry continues to see normalization from recent pandemic highs.

In recent years, Abu Dhabi has enhanced its position as a major pharmaceutical logistics hub, and Etihad Cargo forecasts further focus on developing the UAE capital as a centred for pharmaceuticals, biotechnology and life sciences as part of the emirate’s Economic Vision 2030 plan, under which it seeks to multiply the contribution of healthcare, and life sciences to its GDP by seven-fold within the next two years.

Martin Drew, senior vice president of global sales and cargo at Etihad Aviation Group, said as the United Arab Emirates’ national carrier, Etihad Cargo has fully aligned with Abu Dhabi’s vision and expanded its dedicated pharmaceutical transportation suite to support the emirate’s ambitions.

“Abu Dhabi’s unique location makes the city a prime candidate to become a global pharmaceutical hub. The UAE offers a bridge between not only Asia and Europe but also, further afield, the United States and Africa,” Drew told Asia Cargo News.

“Etihad Cargo’s Abu Dhabi pharmaceutical hub will serve all continents with the exception of South America, and this is precisely why we are focusing on pharma interline agreements that will provide connections with countries to which we currently don’t fly to directly,” he added.

To further strengthen connections between Abu Dhabi and the rest of the world, Drew noted that Etihad Cargo has developed over 1,330 IATA CEIV Pharma and GDP-certified trade lanes, which ensure the integrity of pharma products during transport from origin to destination. Its CEIV Pharma Certification also extends to cargo handling and warehousing at Abu Dhabi International Airport (AUH).

“With a multi-phased cargo infrastructure development strategy in place, including an expanded pharma facility, Etihad Cargo is committed to developing a Cool Chain Centre of Excellence at its state-of-the-art UAE hub.

The launch of our expanded cool chain facility at Abu Dhabi Airport will further expand our current cool chain storage capacity, capabilities and services for pharmaceutical flows,” Drew said, adding that the new facility also supports Abu Dhabi’s objectives to become a life sciences and pharmaceutical hub.

“The future of Abu Dhabi and Etihad Cargo’s pharma operations looks bright,” he told Asia Cargo News. “The key stakeholders within Abu Dhabi’s healthcare and life sciences ecosystem have continued to invest and innovate.”

Aside from pharma, Etihad Cargo is also betting on further boost from transporting ecommerce goods.

Drew said that the Covid-19 pandemic had prompted a shift in consumer behaviour — most notably, “a phenomenal global increase” in online shopping and cross-border trade between ecommerce businesses.

“A key demand driver for air cargo has been the emergence of ecommerce,” Drew said.

Citing data from the International Air Transport Association (IATA), Drew noted that ecommerce shipments contributed approximately 15% of the volume of the air freight shipping industry pre-pandemic.

But IATA has forecasted that ecommerce retail sales will grow by 50% to US$7.4 trillion dollars by 2025, and 2021 saw over 900 million new online shoppers, bringing the total to 2.14 billion people shopping online, representing about 27.6% of the world's population.

“We believe that ecommerce is going to continue growing and will play a major role for air cargo carriers,” he said.

“Etihad Cargo has identified ecommerce as a critical market for cargo growth, further driving Etihad Cargo's focus on building a portfolio of cargo products that enable the smarter and faster management of air cargo,” the Etihad executive further said.

For 2023, Etihad Cargo expects yields to continue to decline as the global economy continues to face headwinds.

“If we look at the outlook for 2023 first, inflation and the threat of recession will need to be monitored closely. We have already witnessed the softening of yields, and we expect further easing as a result of passenger demand,” Drew said.

The Etihad executive noted that the return of widebody passenger flights has normalized freighter utilization and reduced pressure on the air cargo market.

“However, if we continue to see the high levels of passenger travel witnessed in the last quarter of 2022, belly capacity will remain a challenge in the new year until carriers receive the delivery of new aircraft,” Drew said.

Citing IATA, he added that global air cargo volumes would decline by 4% year-on-year in 2023, following an 8% drop in 2022. IATA also predicts cargo volume will decrease from 60.3 million tonnes in 2022 to 57.7 million tonnes in 2023 as the market normalizes after significant growth during the Covid-19 pandemic.

“Although economic indicators suggest continued long-term growth for the air cargo market, significant economic headwinds will continue to impact the sector in the short term as we embark on the new year,” Drew told Asia Cargo News.

Drew also noted that China air trade is “expected to slow down further” – the first time in a decade – and is forecasted to see two consecutive years of decline.

Other challenges that will impact carriers in 2023 are talent retention, high fuel prices and supply shortages, Drew added.

“While 2023 will present challenges for the aviation sector, there is certainly light at the end of the tunnel. We finally saw restrictions being fully lifted, resulting in unprecedented travel demand, and Etihad Cargo is continuing to fill flights with cargo, albeit with a disciplined approach to yields,” he said.

“The unexpected surge in passenger travel may impact cargo capacity in the short term, but the effects will lessen as carriers start receiving the delivery of new aircraft in 2023.”

According to IATA, the global aviation industry is expected to return to profitability in 2023 as airlines move to cut losses stemming from the effects of the Covid-19 pandemic. IATA forecast that airlines are expected to post a net profit of US$4.7 billion, the first profit since 2019. Cargo revenue is expected to reach US$149.4 billion in 2023, down from US$201.4 billion in 2022.

However, Drew said this is still “approximately 50% higher than pre-pandemic levels.”

“The aviation sector is optimistic, with lower oil price inflation and continuing pent-up demand helping to keep costs in check as the strong growth trend continues,” Drew said.

By Charlee C. Delavin
Asia Cargo News | Hong Kong