Air Cargo Volumes Reflect PMI Growth In Q4 2016

The International Air Transport Association (IATA), a global aviation body, recently released important new data. It found that the international air cargo market registered significant expansion in Q4 2016, reflecting the growth seen in the global manufacturing Purchasing Manager’s Index (PMI).

Sector growth

Image of a plane's wing. Ignazio Coraci discusses aviation.
The market is strong

According to Freight Week, IATA figures indicate that the volume of global air cargo rose by 6.8% in the year to November 2016. The organisation attributed this growth to a turnaround in new export orders, a rise in silicon material shipments and a theoretical shift to air cargo, in the wake of the recent collapse of the Hanjin Shipping Company. Commenting, IATA’s CEO, Alexandre de Juniac, said:

“Air cargo enjoyed a strong peak season in November. And there are encouraging signs that this growth will to continue into 2017, particularly with the shipment of high-value consumer electronics and their component parts… But, the trend in world trade is still stagnant.” IATA raised the broader weakness in world trade conditions as a key concern for the sector. For the past two years, trade volumes have trended sideways, before dropping for only the third month in seven years last October.

PMI results

This data’s release coincided with the unveiling of J.P. Morgan/IHS Markit Global’s manufacturing and services PMI survey for December 2016. This Index tracks the health of the international manufacturing industry, with readings of 50 out of 100 or higher indicating growth. Bolstered by increasing employment and new business levels, the PMI climbed to a 13 month high, from 53.4 to 53.4 points, during the November to December period, according to JP Morgan and HIS Markit Global.

The PMI’s expansion across Q4 2016, came in at the fastest pace registered since Q3 the year before. However the rate of growth for the past year was the slowest since 2012, due to lacklustre progress in the beginning of 2016. December’s PMI figures mirrored increasing industrial output in key nations such as China, the US the UK, Japan, Russia and the Eurozone. In nearly all these nations growth accelerated between Q3 and Q4, except in the US, which experienced a “mild” slowdown of expansion.

Speaking out on these results David Hensley, J.P. Morgan’s Director of Global Economic Coordination, was quoted by Freight Week saying: “PMI data signal a positive end to the year for the global economy. Output growth accelerated to a 13-month high, with solid trends seen at both manufacturers and service providers… Improving rates of expansion in new business and employment suggest that the [global] economy is taking positive momentum into the new year, which should ensure the growth recovery continues to take hold at the start of 2017.”

Making progress

The point that Hensley made, concerning the global economy’s positive outlook heading into 2017, is crucial. It suggests that manufacturing companies will continue increasing output throughout the coming year, across the world’s strongest economies. This could open up new business opportunities for air cargo firms like SW Italia, a company headed by Ignazio Coraci which serves the Italian market, to fly more products to consumers worldwide. In this context, the growth of the global air cargo market in November 2016 was not a unique occurrence, as it could continue across the coming year.

More from Cargo News.

SW Italia To Pursue Milan-Chicago Service

SW Italia, an air all-cargo services firm headed by Ignazio Coraci, has announced that it has initiated plans to set up a Milan to Chicago line, as part of its ambitions to establish operations across the US.

Serving markets

Image of an air hangar. Ignazio Coraci discusses SW Italia's new operations.
A new operation is being pursued.

SW Italia is fast-becoming one of the most important all-cargo services in Europe. This carrier service is majority-owned by Ignazio Coraci, via his firm Cargo Invest. Ignazio recently revealed that in 2015 – its first year of operation, SW Italia earned US$1.1m in net profit, on revenue equalling US$25.2m.

The firm has maximised profitability, by developing its network to include key cargo travel destinations for the Italian market. SW Italia operates scheduled services, for example, between Milan Malpensa and Baku, Incheon, Hanoi and Vienna, via a leased 757-400 freighter. It has now applied for an expedited U.S. Foreign Air Carrier Permit to run scheduled and charter flights to key US destinations.

US flights

Freight Week, an industry portal, lists more details on the application, which has been made under the US’ Open Skies Agreement with the EU. It would start with flights between Milan and Chicago. SW Italia has also applied for permission to eventually run scheduled and on-demand charter flights between any points in Italy, through any intermediate points, to any points in the US and beyond.

SW Italia is further seeking permission to run foreign scheduled and chartered air cargo services from any EU member state, via any EU member state or intermediate points, to anywhere in the US and beyond. SW Italia also wants to supply similar services between any points in the US and any other destination. It is additionally hoping to secure authorisation for any scheduled/chartered transports according to any extra rights that may become available to European Community carriers later.

The firm broke down the profits and costs of running air cargo flights between Italy and the US in its filing. SW Italia estimates that with an 80% load factor, its average revenue for running a charter flight between Milan and various destinations on the US East Coast would be US$163,200 at US$1.60 per kilo. The cost of this service would come in at US$275,125.00, but “with the estimated 96 flights in the first year of operations, the financial result per year is estimated to constitute $1,005,600.”

Major investment

It is key to devote significant capital to business expansion operations, in order to ensure that the infrastructure is in place to allow said operations to succeed. The US is the largest economy in the world, with a lucrative air cargo transportation sector. If SW Italia’s application succeeds, it will invest heavily into making its scheduled and chartered services between Italy and the US fruitful. With this strategy, it could harness the power of the US’ booming economy, to build a lucrative revenue stream.


SW Italia Builds On Partnership With HACTL

In late 2016, SW Italia extended its partnership with Hong Kong Air Cargo Terminals Ltd (HACTL), one of the world’s leading air cargo terminal services, with a new deal. This development was welcomed by SW Italia’s President, Iganzio Coraci, who labelled it “an exciting new project” for both firms.

Strong partnership

Ignazio Coraci discusses SW Italia
SW Italia is growing strongly

SW Italia is fast-becoming one of Italy’s leading all-cargo airlines, with the goal of eventually becoming one of the most important in Europe. SW Italia is increasingly developing its network, to connect with the main cargo destinations for the Italian market. The locations currently featured in SW Italia’s network include the US, as well as various Asian markets like China, Vietnam on Hong Kong.

Building its Hong Kong operations, SW Italia has formed an extensive partnership with HACTL. Operating out of Hong Kong International Airport, HACTL supports the import, export and trans-shipment of air cargo for this Chinese city-state, utilising innovative technology to supply world-class service. SW Italia has now tasked HACTL with handling its new weekly Boeing 747-8F service.

Exciting project

An article on Global Trade Mag reports that this service will operate between Hong Kong and Prague. It will be for the exclusive use of Sto Express, one of China’s largest express operators, in what is believed to be the first regular European freight operation undertaken on behalf of any Chinese express carrier. The Boeing 747-8F will carry the livery i.e. company branding of Sto Express in flight.

Speaking out on SW Italia’s Hong Kong to Prague service, Ignazio Coraci said: “We look forward to working with Sto Express on this exciting new project, and are very happy to entrust the vitally important ground handling element of the operation to our long-term service partner HACTL.” This strengthened partnership was also welcomed by Mark Whitehead, HACTL’s Chief Executive.

Commenting further, Whitehead noted that “we are delighted to extend our relationship with SW Italia to include this new operation, which clearly signals the growing role of the mainstream airfreight industry in e-commerce logistics.” HACTL will supply a comprehensive service, encompassing ramp handling, cargo terminal operations, cargo documentation and crew transportation.

New opportunities

Hong Kong boasts a vibrant economy, with a fast-expanding e-commerce sector. Hong Kong International Airport is the world’s busiest airport by cargo traffic, providing plenty of opportunities for firms like SW Italia. SW Italia relies on HACTL’s familiarity Hong Kong International Airport to tap these opportunities, so the firm was the obvious choice, for this new Hong Kong to Prague service.

More from Cargo News.