The current market conditions affecting the global air cargo industry are likely to be the new normal but there is still some cause for optimism in the year ahead, according to the International Air Transport Association.

“On the macroeconomic side, we’re in an environment that can be described as ‘the new mediocre,’” said George Anjaparidze, senior economist at IATA, speaking at the association’s annual World Cargo Symposium in Berlin. “This is the new reality whereby we’re continuing to see expansion of the economy, but that expansion is quite moderate.”

According to Anjaparidze, while world trade only showed weak growth last year, freight tonne kilometre figures have continued their growth momentum since the second half of 2015, which is a positive sign.

“One thing that has been bringing down the general growth in trade has been the bulk commodity and heavy industry trade,” he said. “FTK growth hasn’t been fantastic, but part of the reason it’s done a little better is because of the pick-up in advanced economies, and the sectors that rely on air cargo have not been as adversely hit as others.”

The Eurozone as a whole, for example, which Anjaparidze said has been the worst-performing advanced economy since the global financial crisis, went through a turning point last year where some growth returned and is expected to continue returning.

“That’s really important because Europe isn’t just a large economy; it’s also a large open economy, so it trades a lot with other parts of the world,” he said. “A recovery in Europe would bode well not only for Europe, but also other countries that trade with Europe.”

Across the Atlantic, the US economy appeared to be slowing towards the end of the year, with the Bureau of Economic Analysis estimating that gross GDP grew just 1.4% in the fourth quarter, compared to 3.2% in the third quarter and 3.9% in the second.

Anjaparidze attributed part of that to weather-related issues and the cutting back of investment in the energy sector.

“When we look beyond that, to some of the core drivers of the economy, there are actually some favourable indicators,” he said. “For example, the unemployment rate has come down to a level that we saw before the global financial crisis.”

While Europe and the US didn’t worry IATA too much, Anjaparidze said that the slowing of the economy in China is a concern.

“In principle, the rebalancing of the Chinese economy away from investment-driven growth to consumer-driven growth at more sustainable levels is not something to be alarmed about,” he said. “It’s actually a positive development. But it’s the pace at which this has happened that has created shocks in the global economy, particularly hitting commodity exports the hardest.”

Decreases in semiconductor shipments over the past few months will also generate short-term headwinds, according to Anjaparidze, but in the medium term, strong consumer confidence will be a key point of potential optimism.

However, the issue of overcapacity is still a very pertinent one.  Low fuel prices have resulted in the reactivation of some old freighters and storage capacity is starting to decrease.

“On the capacity dimension, it’s also important to keep in mind what’s happening on the passenger side,” said Anjaparidze. “Since the global financial crisis, what we’ve seen is actually quite good resilience on the passenger side. If you go back to the peak point before the crisis and compare the levels that we’re achieving now, passenger traffic has grown by 45% over this period. That’s been driven by improvements in living standards, lower travel costs and favourable demographics. When you contrast that to what’s happened on the cargo side, FTKs over that same period have only grown by 13%.”

Deliveries of widebody passenger aircraft are far outstripping widebody freighters, generating a lot of extra belly capacity very quickly. According to Boeing, there were just six 747-8F, 16 767-300F and 19 777F deliveries in 2015, while the manufacturer delivered 11 747-8s, 77 777-300ERs, 68 787-8s and 64 787-9s for the year. The contrast was even starker for Airbus, who delivered just three A330-200Fs in 2015, as opposed to 100 A330-200s or -300s, 14 A350-900s and 27 A380s.

Looking ahead, Anjaparidze said that the current demand-and-capacity situation in indicative of what will happen to yields, which have so far been relatively stable over the last few months.

“The impact on yields has not been in excess of what we would expect, given what we’re seeing with the fuel price,” he said. “But with capacity coming into the market both from the passenger and the freighter side, we expect there will be further downward pressure on yields if this continues.”

By Jeffrey Lee

Asia Cargo News | Berlin