Global Air Cargo Market is Growing Slow Done

17th June, the International Air Transport Association (IATA) had its 75th annual meeting in Seoul, South Korea. It announced that it has significantly lowered its global air transport industry net profit forecast for 2019 to $28 billion, much lower than $35.5 billion forecasted in December, 2018. The deterioration of the global trading environment is one of the main catalysts for the deterioration of the air transport market. Among them, the negative effects brought by the overall slowdown in freight demand and earnings are worthy of attention.

In this regard, IATA President and CEO Alexandre de Juniac told delegates and the media: “Although this year will be the 10th year of continuous profitability in the aviation industry, the rate profits are being squeezed by the overall rising costs in labor, fuel and infrastructure. The fierce competition between airlines also affects revenue growth. At the same time, as the Sino-US trade war intensifies, the global trade weakness will continue, not only directly impact air cargo will also drag passenger traffic. Although airlines will still be profitable this year, they need to redouble their efforts.”

If we look at the air cargo business alone, we can easily find that this year’s situation is quite serious and pessimistic. According to data provided by IATA, air cargo demand performed strongly in 2017 (up 9.7%), and demand growth slowed to 3.4% in 2018. This year, due to increased tariffs, increased trade disputes, and policies that are not conducive to cross-border trade, air cargo is basically flat at about 63.1 million tons in 2019 (Note: 63.3 million tons in 2018).

At the same time, relevant personnel of the International Air Transport Association told the Civil Aviation Resource Network that the air cargo volume in the Asia-Pacific region accounts for nearly 40% of the total global air cargo volume, and is therefore the world’s most vulnerable to global trade instability. In April this year, the air cargo demand in the Asia-Pacific region (calculated in freight ton-kilometers) fell by 7.4% year-on-year, which is the sixth consecutive month of negative growth in the region.

As the world’s leading production, processing and assembly base, and one of the most active regions for cross-border trade, trade wars, tariff collection, closure policies, and local protectionism will also negatively affect the future of the Asia-Pacific air cargo market. It is conceivable that if the trade disputes and related conditions are further escalated or deteriorated, the air cargo market will surely fall further.

At the same time, industry experts generally do not expect optimism about the global trade growth rate in 2019. The World Trade Organization (WTO) had predicted that global trade growth may fall by 0.4% year-on-year to 2.6% this year. There are other more pessimistic predictions that global trade may shrink in 2019, and trade disputes are one of the leading factors that cause growth to stagnate or even regress.

In this regard, how should the airline and freight companies adjust their strategic layout, fine operational management, optimize revenue structure, reduce cost and seek new growth points? These are undoubtedly a difficult problem facing the entire air cargo industry.