Geneva, Switzerland — Demand growth is expected to slow in 2019 due to a weaker world trade environment, which has been impacted by increasing protectionism, with tonnage predicted to nearly four per cent, according to the International Air Transport Association (IATA).
The prediction was made at the association’s annual cargo media, held at its headquarters in Geneva, Switzerland, attended by Canadian Shipper.
IATA is predicting that, following an increase of 4.1 per cent in 2018, growth will slow to 3.7 per cent to 65.9 million tonnes, the slowest pace since 2016.
Cargo yields are expected to grow two per cent, well below the “exceptional” 10 per cent growth in 2018.
IATA says this continues to recent strengthening of the cargo business since cost increases are lower.
Overall cargo revenues are expected to reach $116.1 billion in 2019, up from $109.8 billion in 2018.
IATA director general and CEO, Alexandre de Juniac says: “We had expected that rising costs would weaken profitability in 2019. But the sharp fall in oil prices and solid GDP growth projections have provided a buffer. So we are cautiously optimistic that the run of solid value creation for investors will continue for at least another year. But there are downside risks as the economic and political environments remain volatile.”
IATA director general and CEO, Alexandre de Juniac.
The association forecasts that global airline net profits will be $35.5 billion in 2019, up from $32.3 billion in 2018, making 2019 the tenth year of profit and fifth consecutive year where airlines deliver a return on capital that exceeds the industry’s cost of capital.
During a presentation, IATA’s chief economist Brian Pearce, pointed out that air cargo has outperformed the sluggish world economy and grown more over the last five years than other modes of transportation.
He also citing the phenomenal growth in e-commerce for helping to keep air cargo’s share of shipping higher.
Digital technologies have revolutionized the retail industry, IATA’s head of e-commerce and cargo operations, Brendan Sullivan told the assembled media members.
Global e-commerce is growing at 20 per cent on average per year, he said. “With the emergence of many new players and consumers, including developing countries, there’s still a lot of room for growth. 11.4 per cent retail sales are happening online of global retail sales—one product in 10.”
He also said that today, online shoppers want speed, predictability of delivery times and visibility. This requires tracking and monitoring in real time, smart data sharing, speedy customs procedures and efficient and seamless return of products, something the air cargo industry is well positioned to do.
Brendan Sullivan, head, e-commerce and cargo operations, IATA
By improving e-commerce services and making them globally available, developing countries can grow their economies, reducing poverty and inequality, said Sullivan. “The air cargo industry is transforming to capitalize on e-commerce by building global standards, creating partnerships and fostering innovation.”
He pointed out that IATA, including Cargo iQ, works hand-in hand with the air cargo industry in embracing new initiatives and technologies that enable speed, visibility, and predictability such as Interactive Cargo to track, monitor and interact with each shipment, ONE Record to replace all existing paper and electronic documents through a virtual shipment record, Fast Cargo to speed up on-the-ground processes and Cargo Facility of the Future to embrace innovative technologies and processes.
Sullivan also discussed IATA’s Smart Facility solution which is still in the pilot phase as a way to reduce the estimated $160 million the industry spend on cargo handling facility audits.
Currently, the industry spends thousands of man-hours on redundant facility handling audits as each carrier is performing them individually to ensure operating standards are matching agreed service levels. That puts a burden on carriers and facility operators alike, said Sullivan.
He adds that the Smart Facility Operational Capacity (SFOC) audit has the potential to reduce this burden significantly by establishing an industrywide, mutually recognized audit and accreditation scheme that creates trust in the operational capacities of cargo facilities and will allow carriers to reduce their audits to individual unique selling points (USP) instead of validating the entire handling process from A to Z. “If Smart Facility could reduce the total industry audit burden by 20 per cent, this would result in US$51 million in industry savings for one audit cycle alone,” said Sullivan.