Africa expected to drive growth in air freight volumes amid global recovery

12th December 2013

By: Natalie Greve

Creamer Media Contributing Editor Online

  

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International freight volumes are expected to grow by 17% over the next five years, indicating a conservative recovery in global economic activity and world trade volumes, the International Air Transport Association (Iata) Airline Industry Forecast 2013-2017 revealed on Thursday.

Africa was forecast to be the fastest growing region over the forecast period, with a 4% compound annual growth rate (CAGR), while the fastest growing freight route for Africa was expected to be the inter-Africa market at 5.3%.

Following closely behind the continent in terms of growth expectations were the Middle East and Latin America, both with a CAGR of 3.8%, and the Asia-Pacific region at 3.5%.

This was followed by Europe and North America at 2.4% and 2.7% CAGR respectively.

The survey found that international freight volumes were expected to grow at a five-year CAGR of 3.2%, with the US air freight market – the world’s largest – and the Chinese air freight market – the world’s third largest – likely to add more than one-million additional tonnes each over the forecast period.

As a result, China would supplant Germany as the second-largest air freight market in 2017, rendering the five largest international freight markets the US, China, Germany, Hong Kong and the United Arab Emirates (UAE).

Hong Kong and the UAE would both contribute more than 700 000 t each to the additional freight volume during the five-year period to 2017, while the estimated imbalance in yearly freight traffic flows from Asia to North America was expected to reach 1.1-million tonnes in 2017.

Iata director-general and CEO Tony Tyler described air cargo as a key enabler for the movement of high-value products and perishable goods around the globe, with over $6-trillion worth of goods air freighted yearly, accounting for around 35% of total world trade.

“However, more recently, the relationship between international trade and gross domestic product has broken down owing to rising trade barriers and ‘on-shoring’ of production. The successful conclusion of the World Trade Organisation talks in Bali could potentially be very important in kick-starting trade growth,” he commented.

Meanwhile, over the forecasting horizon, Vietnam was expected to be the fastest growing country in terms of air freight volumes with a CAGR of 6.6%, followed by Bangladesh at 5.7%, Brazil at 5.5%, Ethiopia at 5.3% and Peru with a CAGR of 5.2%.

Freight carriage within the Asia-Pacific region would account for around 31% of the expected total increase in freight tonnage over this period.

This came as Iata named the regions with the largest freight traffic shares in 2012 as Asia Pacific with 25.3% of freight volumes, Europe-Asia Pacific with 12.1%, the North and Mid-Pacific region with 10.5% and the North Atlantic regio, with 10.1%.

“Looking ahead to 2017, Asia Pacific is expected to increase its share by around one percentage point to 26.2%, with smaller gains of around 0.3 percentage points in both North America and Latin America to 6.6% and the Middle East-Asia Pacific region to 6.5%,” Tyler noted.

In contrast, traffic shares in Europe and the North Atlantic region were both expected to decrease by around 0.6 percentage points to 8.3% and 9.5% respectively.

TEMPERED OPTIMISM

Iata on Thursday also announced an upward revision of its industry financial outlook, with airlines expected to return a global net profit of $12.9-billion in 2013 and $19.7-billion in 2014.

Both were improvements on the September forecast, which anticipated an industry net profit of $11.7-billion in 2013, increasing to $16.4-billion the following year.

The airline association’s upward revision reflected lower jet fuel prices over the forecast period as well as improvements to the industry’s structure and efficiency, which were already visible in quarterly results this year.

Passenger markets continued to outperform the cargo business, which remained stagnant both on volumes and revenues.

Iata expected 2014 to be a second consecutive year of strengthening profitability, while industry net profit margins would remain weak at 1.1% of revenues in 2012, 1.8% in 2013 and 2.6% in 2014.

“Within this aggregate forecast for the entire industry, performance of individual airlines and regions will vary considerably,” Iata stated.

Meanwhile, the anticipated $19.7-billion profit in 2014 would come on projected revenues of $743-billion.

While Iata said this would be the largest absolute profit for the airline industry – outstripping the $19.2-billion net profit the industry returned in 2010 – it was important to note that 2010 revenues were $579-billion.

The net profit margin in 2010 was 3.3%, some 0.7 percentage points higher than the 2.6% expected for 2014.

“Overall, the industry’s fortunes are moving in the right direction. Jet fuel prices remain high, but below their 2012 peak. Passenger demand is expanding in the 5% to 6% range – in line with the historical trend.

“Efficiencies gained through mergers and joint ventures are delivering value to both passengers and shareholders, and product innovations are growing ancillary revenues,” Tyler held.

However, he warned airlines to temper their optimism with an appropriate dose of caution, citing the “tough” environment in which they operated.

“Competition is intense and yields are deteriorating. Cargo volumes haven’t grown since 2010 and cargo revenues are back at 2007 levels. While some airlines will outperform our estimates and others will underperform, on average, airlines will only make a net profit of about $5.94 a passenger in 2014,” Tyler said.

Edited by Tracy Hancock
Creamer Media Contributing Editor

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