US Air Cargo Sector set for Major Long-Term Growth

New figures indicate that in terms of revenue per miles (RTMs), the US air cargo sector is set to record significant growth throughout the coming two decades. Ignazio Coraci comments.

A plane in the clouds.
US cargo is doing very well.

Brighter prospects

The future is looking fairly bright for the air freight sector. The onset of the global e-commerce market has radically revised the industry’s fortunes. Consumers are now ordering goods online in ever-climbing numbers, often expecting near-instantaneous delivery. Demand for air cargo services, therefore, is spiking, as carriers have the ability to transport goods to consumers via air quickly.

A report conducted by MarketLine, a research firm, indicates that the global air cargo sector is destined to experience strong growth in the next five years. It is expected to record a Compound Annual Growth Rate (CAGR) of 3.6% from 2016 to 2021, a dramatic uplift from the CAGR of 0.7% registered from 2012 to 2016. New research indicates that growth will be particularly strong for carriers who conduct services to and from the US, or domestically within the country, going forward.

According to Air Cargo Week this data was released by the US’ Federal Aviation Administration (FAA). The body recently published its Aerospace Forecast Report Fiscal Years 2017 to 2037 paper, which analysed both domestic and global air freight RTMs. In total, RTMs for the sector dipped by 0.9% in 2016, but are forecast to increase by 1.4% this year, with momentum expected to rise going forward.

Revenue expansion

Explaining, the report stated: “Driven by steady US and world economic growth, total RTMs are projected to increase at an average annual rate of 3.1% for the balance of the forecast period. Following a 1.8% increase in 2016, domestic cargo RTMs are forecast to grow 1.7% in 2017 as the US economic recovery continues. Between 2016 and 2037, domestic cargo RTMs are forecast to increase at an average annual rate of 1.3%. In 2016, all-cargo carriers carried 89.0% of domestic cargo RTMs.”

It also noted that international air cargo RTMs rose by 0.9% in 2015, but dropped by 2.4% last year, due to “slow growth in the US and Europe along with the slowdown in China’s economic growth slowed worldwide trade.” But “growth is expected to turn positive in 2017 to 1.3% as global trade growth resumes. For the forecast period (2017-37) international cargo RTMs are forecast to increase an average of 3.8% a year based on projected growth in world GDP with the Pacific region having the fastest growth, followed by the Other International, Atlantic, and Latin regions, respectively.”

The future looks particularly positive for all-cargo services. According to the FAA, all-cargo’s share of domestic US RTMs should expand to 90.5% between 2017 and 2037, while its share of international RTMs is forecast to increase to 77.1% within the same period, up from 70.8% as of 2016. The FAA also noted that driven by expansion in freight RTMs, the cargo carrier large jet aircraft fleet operating within the US market should grow from 810 aircraft at present, to 1,044 aircraft by 2037.

Facing challenges

Commenting, Ignazio Coraci said: “It is not surprising that total RTMs for US air cargo, domestically and internationally, are set to expand in the next 20 years. It is now very easy for consumers to order goods and they expect speedy service, which air cargo is uniquely suited to provide. As shopping online becomes more popular, this trend could grow, especially in the US, which is both a very consumer hungry market and the world’s largest economy, fuelling demand for efficient air freight services.

“It is important, however, that air cargo carriers which operate within the US market do not rest on their laurels, if they wish to tap into this growth. Consumer expectations are evolving, and firms need to go further to position themselves as trusted providers of first-rate air cargo services. It is critical, for example, for carriers to go paperless, to promote their sustainability credentials to consumers who are becoming increasingly concerned about the effects of paper production on the environment. Only by putting consumers first, will air freight companies benefit from the sector’s potential for growth.”


SW Italia Completes First All-Cargo Brescia to Hong Kong Flight

SW Italia, in collaboration with several key airport industry firms, recently completed its first all-cargo flight between Brescia and Hong Kong, via Baku. SW Italia’s President, Ignazio Coraci, comments.

The trip is a first for SW Italia

Expanding SW Italia 

Situated at Malpensa airport Milan, SW Italia is an Italian cargo-only carrier. In its bid to become one of Europe’s leading air cargo services, SW Italia is embarking on ambitious expansion plans. The firm has designs to provide links to the most in-demand destinations for the Italian air cargo market, ranging from the United States in one hemisphere, to Azerbaijan and Hong Kong in the other.

SW Italia is committed to forming strong partnerships with other key industry players, to transform its expansion plans into a reality. The firm is in the process of forming a robust relationship, for example, with STO Express, a leading Chinese courier. SW Italia has provided STO Express with a new Boeing 747-400F for its lucrative Hong Kong to Prague Service, while growing its fleet.

Landmark flight

This Boeing 747-400F is also expected to make three flights per week between Brescia Montichiari airport, based near the Italian city of Brescia and Hong Kong airport, via Baku airport, which is located in Azerbaijan’s capital Baku. This is a collaboration between SW Italia, STO Express, SAVE Group, the asset management firm for Venice airport and Catullo, which manages Brescia airport.

An article on iVolo, an Italian news source, has confirmed that the Brescia/Baku/Hong Kong route’s maiden flight has now taken place. It confirms that STO Express, which is currently developing its traffic flows between Europe and the Far East, is guaranteeing handling all incoming products on the service, which will be delivered to warehouses across Europe to be bought by consumers online.

Major progress

In a statement, SAVE Group said: “Brescia airport is a major link, [and this deal]… represents a concrete step in the process of revival of this airport, whose high potential found new expression thanks to synergic management of the North East hub airports. The agreement with SW Italia and STO Express is a starting point, the real prospects for developing it gradually consolidate the airport of Brescia as a base for Southern Europe with increasing flows to and from European countries and the Far East.”

Adding further, SAVE Group Chairman Enrico Marchi said: “The agreement with SW Italia is the confirmation of the airport of Brescia potential as a cargo airport and the role it can play for the productive heart of Northern Italy. We believe that the shared project with SW Italia and STO Express has very high growth prospects, boosted by a partnership between realities that share the same goals with enthusiasm. For the SAVE Group, the connections of SW Italia in Montichiari represent the first important step in the revitalisation of the airport of Brescia.”

Right choice for SW Italia

The deal has been greeted just as positively by SW Italia. Speaking out, its CEO Francesco Rebaudo noted: “I have always been convinced of the great potential of this airport…  For an airline like ours, the choice of the base of operations is a particularly important step for the network development strategy. In this sense, I strongly believe that Brescia constitutes the right airport for SW Italia.”

Espousing a similar viewpoint, SW Italia President Ignazio Coraci said of this new service: “We look forward to working with STO Express to this new exciting project and we are very happy to inaugurate a long-term collaboration with the Brescia airport.” With this first ever Brescia to Hong Kong, via Baku, all-cargo flight running smoothly, the future looks increasingly bright for SW Italia.


Logistics Sector Needs Customs to Remain Simple After Brexit

There is a chance that Brexit will bring sweeping changes to the global logistic sector, including the air cargo segment. Experts recently spoke out to argue that for Brexit to benefit logistics, the British government must ensure the UK’s customs framework remains simple, so firms can keep costs low.

Plane in the sky at Dusk
What will Brexit change?

Crucial relationship

The UK is major play in the global air cargo industry. It is the world’s fifth largest economy and boasts strong trading relationships with some of the biggest consumer markets on the planet, perhaps most notably the EU.  It is also home to one of the world’s largest airports, Heathrow, which is such a busy air freight hub, that it actually saw cargo volume expansion, outpace passenger growth last year.

The UK’s robust ties with the EU, have made it an attractive market for air cargo firms. It is possible to transport goods from the UK to other EU members, for minimal expense, as they all form part of a single market, so carriers face minimal administrative burdens. According to The Guardian, the EU accounts for a third of exports from UK cities, which themselves comprise 60% of the nation’s exports, showing just how important this relationship is to the national and global air cargo market.

Brexit changes

The UK’s decision to leave the EU could prove either beneficial or problematic to air cargo. It will allow Whitehall to take greater control of business regulation, so they can cut red tape and lower trading costs for carriers. But due to domestic pressures, the UK’s government is determined to limit freedom of movement from the EU to the country after Brexit. EU leaders have warned that this will make it impossible for the UK to remain in the lucrative EU single market and strike a favourable trade deal.

An article on The Loadstar, an industry portal, suggests that experts believe that there are provisions any trade deal must include to ensure air cargo and logistics benefit. They espouses this opinion at the recently held Keep Britain Trading conference, organised by the Freight Transport Association. Experts argued that in any trade deal, Whitehall must promote simplified customs procedures, to ensure that Brexit provides an opportunity to advance the nation’s logistics infrastructure.

Expert analysis

Richard Currie, UPS’ Director of Public Affairs, noted that promoting seamless UK/EU connectivity is essential to achieving this aim. He said that if this was not achieved, “this would increase procedures and Customs processing, resulting in major backlogs across the supply chain.” The British Port Association’s (BPA), Chief Executive, Richard Ballantyne added that facilitation is key. Explaining, he noted that “Ports are natural bottlenecks, Bureaucracy, particularly in Customs and border procedures, can cause significant blockages,” so it’s critical that the UK has customs-light procedures.

The panel also cited several other concerns, with how Brexit may impact the UK’s logistics industry. Currie suggested that the UK needs to strike secure new open skies agreements with the EU and the US, to ensure air cargo firms can transport goods easily and efficiently. Several members also asked Whitehall to clarify the issue of immigration, as logistics is facing a skills shortage, so businesses know whether they’ll be able to access the top talent they require to thrive in a post-Brexit world.

But the panel conceded that Brexit could help the UK develop supply chain technology. Commenting, Neovia’s Supply Chain Operations Director, Kevin Lucas, said: “Artificial intelligence, innovation and thinking outside the box can all benefit from Brexit… It will provide a platform for us to think further on how we use technology and maybe the impetus to deploy it.” Concurring, Ballantyne said that “sensitivity and intelligence,” is needed in Brexit negotiation to ensure that logistics benefits.

IATA Chief Implores Air Cargo to go Paperless

Industry body the International Air Travel Association (IATA) recently held its 11th World Cargo Symposium in Dallas, Texas. At the event, the sector’s best gathered to discuss on air freight’s most pressing issues, and during the Symposium, the IATA’s chief implored carriers to go paperless.

Airport at dusk
There was a sense of cautious optimism.

Cautious optimism

During his speech, IATA CEO Alexandre de Juniac admitted that the global air cargo industry can be characterised by a feeling of “cautious optimism.” In January 2017, we saw air freight levels expand at a faster pace than they did the same month the year before. January is traditionally bad time for air cargo, due to slackening demand, so this illustrates the buoyancy of the sector as it currently stands.

Juniac explained that this optimism has been spurred by a rise in exports, along with double-digit e-commerce expansion. The World Trade Organisation’s recent global trade agreement, which IATA backed and should reduce trade costs by 14.3% on average, could make exports even more profitable for air cargo. He added that the sector’s prospects have been further lifted by the worldwide pharma market, with which it regularly conducts business, and is expected to be worth US$1.2 trillion by 2022.

Meeting demands

But, Juniac argued, it “has never been more important,” for air cargo to listen to customers, even in this current climate of potential and profitability. Yes, he conceded, air cargo volumes are growing, but shippers now expect more from the services they’re paying for. Going on, he said: “Innovations like Amazon, Baidu and Rakuten cut across modern society—with the exception of the air cargo world. Our customers are disappointed in the bureaucracy of our complicated processes.”

It’s also critical to note that consumers are placing an increasing emphasis on sustainability in the supply chain. A study from the University of Tennessee found that consumers care about where their products come from, and about the impact said goods have on the environment. This leads to the conclusion that sustainability could be beneficial to air cargo bureaucracy as well, allowing carriers another opportunity to display their green credentials to consumers and secure more business.

Convoluted practises

Speaking at the Symposium, Juniac was quoted by Freight Week, a sector publication, saying that consumers are “increasingly frustrated with complicated and convoluted paper-based processes that belong in the 16th century.” Expanding, he said “a single cargo shipment can require up to 30 pieces of paper. That’s a ridiculous and unnecessary waste of resources in our Internet-connected world.”

He said that his body has rolled out various e-cargo initiatives, to reduce paper and promote sustainability. But they are having had a limited effect, due to lacklustre interest. Continuing, he noted: “Shippers today want responsive services based on intelligent systems able to self-monitor, send real-time alerts and respond to deviation. Technologically speaking, this is totally possible… The key to this and other innovations is using data efficiently and effectively. Finding solutions to unfulfilled expectations creates value for customers. And that propels a business forward.”

Embracing the future

Commenting, Ignazio Coraci said: “Alexandre de Juniac made a valid point at the 11th World Cargo Symposium. It’s becoming clear that with the rise of e-admin tech and the climbing awareness of the environmental impact of paper, the industry cannot rely on paper for much longer. As the IATA continues to push e-cargo initiatives, it could change the ways carriers operate, providing a more cost effective, sustainable service for customers and potentially allowing firms to see higher returns.

Air Freight Sees Boost Under Current Climate

A plane in the clouds.
The current climate favours air traffic.

The first few months of 2017 have seen an uncertain global economic climate and rising sea freight congestion.

Experts recently argued that this has boosted the fortunes of the global air cargo sector during the early part of this year, as more firms are choosing to transport goods via air.

Expanding market

The air cargo sector is booming right now, with figures from industry body the International Air Transport Association (IATA), indicating that it outperformed forecasts last year. Global air freight volumes grew at an average of 2% per annum, between 2010 and 2015. However in 2016, international air freight volumes expanded by 3.8%, showing that demand is climbing ever higher.

The market’s long-term prospects also look positive. A study from MarketLine, a research company, suggests that the global air freight market grew at a Compound Annual Growth Rate (CAGR) of 0.7% from 2012 to 2016. The market’s CARG, however, is expected to climb to 3.2% between 2016 and 2021, so by 2021, it will be worth US$118.7bn, increasing from US$101.3bn at present.

Positive indicators

The air cargo market’s long-term growth prospects started to become more apparent in early 2017. We can find evidence of this by looking to the semiconductor industry, which serves as a traditional indicator of the fortunes of air cargo. This sector’s sales increased by 13.9% year-on-year, to reach US$30.6 billion in January 2017, marking the largest year-to-year expansion since November 2010.

An article on Loadster, an industry publication, sheds light on why air cargo is thriving right now. It revealed that forwarders are currently reporting congestion and higher rates on westbound air cargo services. It suggested that this has been spurred by increasing demand, rising sea freight congestion and in the case of the UK, where air cargo volumes are particularly high right now, a weaker pound.

Talking congestion 

The publication talked to one source, who revealed that many air cargo firms have two to three day backlogs right now. Demand is especially high, the source added, for routes from the UK to New York, Chicago, Miami and Houston. Going on, the source said that their shipments are seeing the impact of congestion and that “generally carriers are very busy, and westbound into the US is mega-busy.”

It looks as though business pressure is affected carriers on these routes, the source added. This pressure comes from exchange rates, the current state of the US economy and severe February weather conditions on the US North-East Coast, which has created backlogs. Another European forwarder argued that the re-positioning of containerships has had an impact on the sector, with several sources suggesting that the export market is healthy right now, benefitting global air cargo.

Healthy exports

A UK forwarder concurred, adding: “We have seen an upturn in exports, but this is partly owing to an increase in market share and partly new opportunities, but always planned as air rather than distressed sea freight.” Offering a slightly different opinion, another forwarder from Europe noted: “It’s strange activity for the time of year as it is just based on increased demand. Air freight is seeing a resurgence.

“I think that UK goods are very attractive at the moment because of the currency differential with the US – it’s got much cheaper. Not only is demand high, but people can also afford to airfreight at the moment because goods are cheaper. And there are issues with sea freight.” This European source further argued that cutbacks to freighter capacity could have also had an effect on the air cargo sector.

Sunny outlook

Offering his take on the situation, Ignazio Coraci said: “Due to the economic environment we are currently facing, along with the troubles the sea freight sector is experiencing, the outlook looks fairly sunny for air cargo. We can look at what’s happening at Heathrow airport, where my firm ASC Cargo operates, to see this point. Heathrow recorded incredible growth rates in 2016, and saw air freight expand yet again in January 2017, fast-reaching capacity. With demand so high, especially in the UK, the global air cargo sector could be set to realise its significant long-term growth projections.”

Heathrow Sees More Growth in February 2017

London’s Heathrow airport is currently going from strength to strength. The UK’s primary air transit hub racked up considerable air cargo expansion rates during 2016, while new figures indicate that freight volumes continued to grow early this year.

There has been good growth at Heathrow.

2016 growth

Heathrow is the world’s primary air gateway to the vibrant British economy. It is becoming a crucial transit point for global air cargo transport, as the onset of e-commerce is facilitating a greater need to get goods across borders quickly and efficiently. This has allowed Heathrow to regularly record monthly air cargo expansion rates of around 5%, which it did in December 2016.

The airport’s fortunes rose to new heights in 2016. It added new services to Jakarta, San Jose, Santiago and Inverness, making it easier for air cargo carriers to fly goods all over the world than ever before. Data shows that Heathrow’s air freight rates climbed by 3%, year-on-year, in 2016.  This expansion outpaced passenger growth at the airport last year, as the number of passengers who travelled through Heathrow saw an uptick of around 1% within the same 12 months.

Continued progress 

This growth pushed Heathrow’s air cargo volumes past the 1.5 million tonne mark in 2016. Heathrow’s freight capacity sits at around 1.5 million tonnes, meaning that demand for the airport’s services is fast outstripping supply. According to Air Cargo Week, an industry portal, Heathrow’s freight volumes only keep expanding, with the airport registering a 4% rate of growth in February of this year.

This progress can be attributed to the rising role of emerging markets at Heathrow. The hub saw air cargo volumes go up by 10% on services to Brazil, by 5% on services to India and by 4.2% on services China, while the North American and Middle Eastern markets saw increases of 7% and 8%. In the first two months of 2017, therefore, 251,212 tonnes of air cargo were handled at Heathrow airport.

Flying start

Commenting on these extremely positive figures, Heathrow’s Chief Executive Officer, John Holland Kaye, said: “Heathrow is off to a flying start in 2017 – we’re delivering the best service of any major airport in Europe to record numbers of passengers and boosting British exports with record cargo volumes.” Speaking about how Heathrow will progress in future, he continued:

“Our new sustainability leadership strategy will make Heathrow a centre of excellence for sustainable aviation and planning for expansion is firmly underway with SMEs across Britain lining up to help us deliver it.” Heathrow recently announced plans to make its proposed third runway carbon neutral, to minimise air and noise pollution. The runway could increase its air cargo capacity to 3 million tonnes.

New opportunities

Explaining the significance of this news to the global air cargo industry, Ignazio Coraci commented. “Heathrow is racking up incredible air freight growth volumes right now, bringing a constant stream of new business for carriers. But it’s becoming increasingly clear that Heathrow is reaching capacity, limiting opportunities for our sector. A third runway would address this issue, giving Heathrow the ability to bring new opportunities to the global air cargo sector, so we can all grow together in future.”


IATA Backs Major Global Trade Agreement

Industry body the International Air Transport Association (IATA) has backed the World Trade Organisation’s (WTO) major new trade deal, which recently received enough signatories to come into force.

Industry lifeblood

Air cargo and trade are inextricably linked. The sector depends upon the free flow of goods across national boundaries, especially when long-distance travel is required, to generate business. The onset of digital technology, which has brought about the e-commerce age, has boosted the fortunes of the international air cargo industry, as it has allowed consumers to purchase goods more conveniently.

This is reflected in global trade figures for 2016, when the industry saw moderate growth. According to the World Bank, merchandise trade volumes expanded by just over 1%, despite facing uncertain geopolitical headwinds, brought about by a wave of anti-globalist sentiment that has washed over the Western world. In contrast, the trade rate grew by 2% and 2.7% in 2015 and 2014 respectively.

Trade Agreement

Yet the industry’s fortunes could be boosted by the WTO’s new deal. Called the Trade Facilitation Agreement (TFA), it is forecast to reduce signatories’ trade costs by 14.3%, on average, upon full implementation. The TFA needed the backing of 110 WTO members, which it recently received when it was ratified by Rwanda, Oman, Jordan and Chad, according to Freight Week, an industry publication.

The IATA welcomed the agreement, arguing that it will lower the amount of time it takes to import and export goods by air, by 47% and 91% respectively. Expanding, IATA’s Director General Alexandre de Juniac said: “The TFA will cut red tape at the border for faster, cheaper and easier trade. That’s great news for airlines, which deliver about a third of the goods traded across borders by value.”

Generating revenue

The agreement is designed to promote greater trade, by standardising existing trade regulations among signatories in several key areas. This includes expediting the clearance, release and movement of products, based on a provision to accept electronic documentation and e-payments. Commenting on the ratification Roberto Azevêdo, the WTO’s Director General, labelled it “fantastic news.”

This is because, he added, the TFA will slash trade costs and “kick-start technical assistance work to help poorer countries with implementation,” potentially leading to a US$1 trillion rise for global trade revenues per year. Expanding, he noted: “This is the biggest reform of global trade in a generation. It can make a big difference for growth and development around the world. Now, working together, we have the responsibility to implement the agreement to make those benefits a reality.”

Ignazio Coraci’s take

The TFA has also been welcomed by industry figure Ignazio Coraci. Explaining how it could benefit the global air cargo sector, he commented: “The TFA will bring about standardisation in air transit rules, and this could be very good news for carriers. When firms are forced to modify processes, based on the countries they are operating within, their business costs rise, cutting into their profits. By rolling out a global standard, the TFA has given air cargo firms the ability to slash costs, potentially leading to growth.”

Third Heathrow Runway to be “Carbon Neutral”

The plans to build a third runway at Heathrow airport, which would massively increase the facility’s capacity, have proven controversial, due partially to environmental concerns. The airport’s boss has recently aim to alleviate these fears, by pledging that the new runway will be “carbon neutral.”

Expanding capacity

Heathrow is London’s primary air transit hub, and one of the busiest on earth. It is also a vital facility for air cargo transport, as fresh figures indicate that in 2016, 1.53m tonnes of air freight were flown out of Heathrow. This signals a rise of 3% from the year before, and means that last year Heathrow’s air cargo growth expanded at a faster pace than its passenger growth, which climbed up by 1%.

The airport is so busy, that it is fast reaching capacity, which is why they want to build a third runway. This would allow Heathrow to expand its air cargo capacity from around 1.5m tonnes at the moment, to 3m tonnes, giving a major boost to the UK’s economy. When Whitehall greenlighted the plans in October 2016, they said that the runway could bring up to £211bn in economic growth to the UK.

Addressing concerns

But the third runway has faced serious opposition, especially at the local level, due to air and noise pollution concerns. A recent Commons Environmental Audit Committee (EAC) report demanded that Heathrow clarify a number of issues, before it lets the project commence, which is legally required. This includes detailing how the runway will be viable without raising the number of serious breaches of national air quality limits, as well as how they will minimise carbon emissions and aircraft noise.

Heathrow’s CEO, John Holland-Kaye, recently addressed these worries by releasing the airport’s Heathrow 2.0 strategy. This commits Heathrow to making its airport more environmentally-friendly, as well as devoting £500,000 to the creation of a research centre which will be designed to minimise aircraft pollution and noise. In the strategy, Heathrow also promised halve, at a bare minimum, the number of late-night departures at Heathrow, to lower the impact of craft noise on local communities.

Going carbon neutral

Commenting on this strategy recently at the London-based British Chambers of Commerce conference, Holland Kaye was quoted by the Evening Standard, a local news outlet, saying: “Today we are proud to announce our aspiration for the growth from our new runway to be carbon neutral. In effect, our goal is to decouple our airport’s growth from climate change, something I’m not sure that we could have stood here five years ago and said, but today we are proud to commit to.

“This is not just the right thing to do, it also makes good business sense. It will enhance the skills of our people, help us to retain talent, reduce our operation costs and create a new covenant whereby the airport community and our local communities work together to improve the quality of life of local people – many of whom work at the airport. And for an airport flying passengers to all corners of the globe, surely it makes good business sense to preserve a world worth travelling.”


Global Trade Sees Moderate 2016 Growth

New figures show that global trade volumes experienced moderate growth in 2016, but the rate of expansion declined, when compared to previous years. Ignazio Coraci weighs in on what this means for the international air cargo sector, as it operates in an increasingly uncertain geopolitical climate.

Trade growth

The World Bank recently released its Global Trade Watch: Trade Developments in 2016 report. For the paper, the World Bank looked at trade in 18 countries, across 18 years, to deliver long-term trends. In 2016, global merchandise trade expanded by just over 1%, marking the fifth consecutive year of moderate expansion. But it was the worst year since the global economic crash of 2008 – 2009.

In contrast, trade volumes expanded by 2% in 2015 and by 2.7% in 2014. The weak expansion seen in 2016 was evidenced in developing and high-income economies, whereas in prior years, it was only experienced by either one or the other. The World Bank noted that an uncertain political environment potentially reduced trade growth by 0.6% last year – 75% of the difference between 2016 and 2015.

Uncertain politics

2016 was the year that broke the political mould, as anti-globalist sentiments swept the western world. In June, the UK chose to leave the EU, striking a blow against the continent’s integrated trading strategy, while in November, Donald Trump – a man who wants to end the US’ involvement in global trade deals, became its president. Air cargo depends upon the easy free-flow of goods across international boundaries, so if these developments damage trade, its fortunes could be impacted.

Speaking out on these findings, the paper’s authors were quoted by Global Trade Mag, a logistics sector publication, saying: “Policy uncertainty in Europe and the United States had a negative impact on trade by reducing overall global growth… In a more uncertain environment, firms may choose to postpone investment and export decisions and consumers may cut back spending. The threat of unravelling trade agreements may also hurt trade growth by adding to policy uncertainty.”

Spotlight on cargo

The World Bank also concluded that trade growth may have been impacted by declining productivity expansion, which has been reflected in the stagnation of global value chains. However, this seems to have had a minimal impact on global air cargo’s fortunes. Data shows that the sector experienced a Compound Annual Growth Rate (CAGR) of 0.7% from 2012 to 2016, but the pace of growth picked up towards the end of the year, and it’s expected to record a CAGR of 3.2% from 2016 to 2021.

Commenting, Ignazio Coraci said: “There’s no doubt that the rise of anti-globalist politics across the western world, which holds the planet’s most lucrative consumer markets, coupled with stagnating productivity, has impeded trade growth. It is key that firms face minimal barriers, when transporting goods across international boundaries, to keep their operating costs as low as possible. So this movement could have negatively impacted investor sentiment, in turn restricting trade growth.

“But this may not limit opportunities for global air cargo. This could be because of the onset of e-commerce, which allows consumers to purchase goods directly from anywhere. These consumers expect speedy service, so airplane is often the transportation mode of choice for e-commerce firms, bringing increasing flows of new business. Cross-border e-commerce is expected to grow rapidly in the next five years, so this could somewhat insulate the air cargo industry from anti-globalist politics.”

Heathrow’s Freight Expansion Outpaces Passengers

London’s Heathrow airport is one of the world’s busiest air cargo hubs. It faces little risk of losing this position, as new figures show that Heathrow saw such strong air cargo growth in 2016, that the rate of this expansion outpaced the rise in passenger numbers it experienced during the same period.

The expansion has been overwhelming

Massive hub

The UK’s capital is an economic powerhouse. London is one of the planet’s leading financial markets for global businesses. It is also developing lucrative technology sector, with its financial technology industry doing particularly well. According to We Are Top 10, a technology resource, London’s gross domestic product (GDP) is currently US$731.2bn, making it the world’s fifth wealthiest city.

A significant amount of London’s GDP comes from exports, which currently stands at roughly £92bn per year. London depends on its logistics sector, to transport goods to consumers overseas and capitalise on its export potential. Heathrow is London’s biggest airport, making it the lynchpin of its logistics landscape and it is growing fast. In December 2016, Heathrow’s air freight volumes increased by 5%, despite the fact that this is traditionally a slow month, reflecting rising industry confidence.

Rising volumes

Industry confidence in Heathrow’s air cargo prospects seems to be founded. Sector portal Air Cargo News reports that across 2016, Heathrow experienced a 3% climb in air freight volumes. This means that 1.54m tonnes were flown out of Heathrow across last year. This was attributed to its new services to Inverness, Santiago, San Jose and Jakarta, as well as to the £674m in investment it saw in 2016.

On the back of this progress, Heathrow’s earnings vaulted from £2.7bn in 2015, to £2.8n last year. What was interesting, was that Heathrow’s passenger volumes ticked up by 1% across 2016, meaning that a record 75.7m people walked its halls throughout last year. From this, we see that Heathrow’s growth in air cargo business actually outpaced its rise in passenger visits in the past 12 months.

Heathrow milestone

Speaking on these figures Heathrow’s Chief Executive called 2016 “a milestone for Heathrow.” He added that Whitehall’s decisions to finally announce its support for the long-proposed third Heathrow runway and unveil a four-month public consultation on a National Policy Statement has boosted the airport’s fortunes. Going on, he noted: “I am very proud of what our 76,000 colleagues have achieved. We helped British businesses across the country trade more with the rest of the world.”

Adding commentary Ignazio Coraci, the CEO of ASC Cargo, which runs freight and ground handling services for airlines at Heathrow, said: “We have seen more firms fly goods from and into Heathrow than ever in 2016, as the rising e-commerce sector makes it easier for consumers to order goods directly worldwide. We are proud to provide the cargo handling services, such as warehousing and direct transport airside, that players need to make the most of this thriving global commerce hub.”