Recent reports suggest that the world’s air cargo sector is set to record significant growth during the next five years.
The world’s export landscape is rapidly changing. The breakneck-speed of technological advancement is making it easier for firms to ship products to the other side of the world than ever before. Meanwhile, emerging nations across the world, especially in the Middle East and Asia-Pacific (APAC), are increasing their manufacturing output constantly, delivering more opportunities for air exporters.
A report compiled by MarketLine, a research firm, indicates that rising Middle East and APAC manufacturing has been beneficial for the international air cargo sector. Global Trade Mag reports that according to MarketLine, the sector expanded at a Compound Annual Growth Rate (CAGR) of 0.7% from 2012 to 2016, although there were times of varied growth and decline within this period. This means that by the close of last year, the global air cargo market was valued at US$101.3bn.
The closing quarter of 2016 signalled a time of renewed growth for the global air cargo sector. Data from the International Air Transport Association (IATA), a worldwide aviation body, suggests that the volume of air cargo increased by 6.8% in the year to November 2016. Meanwhile, of J.P. Morgan/IHS Markit Global’s manufacturing Purchasing Managers Index (PMI), expanded at its fastest pace in the last quarter of 2016, than it had since the third quarter of 2015, indicating growing confidence.
MarketLine’s study also suggested that the air cargo market will keep expanding, going forward. The firm noted that even though cargo volume expansion slowed in 2015 and 2016, new technology is entering the sector and this is set to ensure that volumes rise at a steady rate going forward. Coupled with increasing APAC infrastructure, this is set to ensure that the global air cargo sector climbs by a CAGR of 3.2% between 2016 and 2021. By 2021, the market will be valued at US$118.7bn.
As the report was released, MarketLine Analyst Paul Todd issued a clear warning to air cargo firms. Expanding, Todd said: “Despite a positive outlook for the air freight sector, companies must always consider the threat from alternative freight methods. The advantages to the customer must be sufficient to ensure healthy growth in this sector.
However, Todd added that the market is ripe for expansion in the next few years. Going on, he noted: “Oversupply or increased competition may be potential threats… but the recent bankruptcy of Hanjin, a leading marine freight company, could be positive for the air freight sector as its players may pick up some trade from consumers who have lost confidence in marine transport.”
There are many factors, which could influence the fortunes of the international air freight sector in the next five years. Overcapacity was a big issue for the industry in 2016, as it suppressed cargo yields and forced rates downwards and it was primarily the decreasing price of crude oil, which allowed the sector to grow significantly in the final quarter. Yes, conditions are currently favourable for growth, but the industry must deal with the overcapacity problem, to ensure it thrives going forward.