Falling yields, oil prices, growing capacity, digital processes and e-commerce volumes, the picture painted of the air cargo industry at the International Air Transport Association’s ninth World Cargo Symposium, held in Shanghai (China) last week, was one of mixed blessings.
“While the growth in volumes is welcome, it is not being matched by an improvement in yields and revenues. Cargo revenues remian below their 2011 peak, and yields are set to decline for a fourth straight year in 2015,” IATA director general and chief executive officer, Tony Tyler, tells the audience of the symposium’s plenary session on Tuesday 10 March.
The association’s Cargo eChartbook for the first quarter of 2015 says of yields: “Overcapacity has resulted in lower load factors and has placed downward pressure on yields.” Speaking to Air Cargo Week at the symposium, IATA economist George Anjaparidze says that yields will not be helped by fallling oil prices becaue the market is so competitive carriers will have to reduce prices as their cost base falls with the oil price.
The over capacity issue will continue to marr the industry, as IATA’s eChartbook states: “Aircraft utilisation rates and freight load factors will continue to be challenged by fleet expansion with an expected 7.4 per cent increase in 2015 of new widebody aircraft.” IATA also calculates that for every one tonne of freighter capacity being added to the world’s fleets, bellyhold capacity will see three more tonnes.
Paperless processes and digital messages with e-Freight is seen as one of three priorties for the industry. For IATA, the industry should be aiming to achieve 45 per cent electronic air waybill use this year and 80 per cent in 2016. At the symposium, it was announced that IATA, Shanghai Customs, Shanghai Entry-Exit Inspection and Quarantine Bureau, Shanghai Airport Authority, China Eastern Airlines, and Shanghai E-port have signed a letter of initiative to jointly promote e-Freight in Shanghai.
The other two priorities set out by Tyler are, creating global handling standards for pharmaceuticals and the safe transportation of lithium ion (li-ion) batteries. For IATA, li-ion regulations and guidance exist, “but these are not being fully adhered to by all shippers. China is the largest producer of [li-ion] batteries and therefore a key market.” Earlier this month, United Airlines and Delta Air Lines both put restrictions on li-ion batteries.
One positive note at the symposium was the contnued rise of e-commerce. In a final session of the symposium on Thursday 12 March, called China International, participants heard that integrators were not the only transporters of e-commerce. Such was the growth in online shopping that the rest of the airfreight industry was seeing its impact. One drawback to this that is linked to the li-ion issue is small shippers shipping batteries without knowing the regulations and following them.
According to IATA and one of its guest speakers from the advisory practice Seabury Group, Chinese consumption is now a driver of airfreight growth, but this means a slowdown in its economy is a threat. On the symposium’s first day, IATA economist Julie Perovic identified a Chinese property price collapse as a possible cause for a slowdown. With so many issues for the industry to overcome, in his 10 March speech Tyler says that: “The industry has a major challenge on its hands to find a way to make air cargo pay.”