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Cargo

Voice of the people

Whether it’s e-freight failures, lack of innovation or fuel price worries, Airline Cargo Management’s readers have plenty to say about the industry in our annual survey. Alexandra Lennane takes a close look at the results to find out if there will be trials, tribulations or triumphs in the coming year
 

Growing pains

 

Economically, it may be raining, but – and perhaps this is a prerequisite for working in the constantly challenging environment of air cargo – the industry seems to have more than a little optimism about the way things are going this year, at least on an individual company level. While IATA forecasts a miserly 1.4% increase in cargo demand for this year, only 35% of Airline Cargo Management readers expect to see growth of 2% or less in their own business, with the largest single category, at 34.3%, predicting growth of 5% or more (see chart 1). This is somewhat surprising, given that half the respondents are based in the now chronically recession-hit Europe. When we narrow this down to just respondents who work in airlines, 37.5% predict growth of 5% or more, 12.5% expect negative growth, and 32.5% expect around 2% growth in 2013 (see chart 1a).

 

This is perhaps at odds with readers’ predictions for the global air cargo industry, which they, however confident about their own business, think is far more doomed. Nearly half believe there will be growth of about 2%, only 8.5% think growth will be at least 5%, while 14.5% think there will be no growth, just contraction (see chart 2). For airlines in Europe, on the other hand, almost half of our readers believe the carriers are destined for negative growth (see chart 3). Slightly better off will be North American carriers, which 47% of respondents believe will see growth of some 2%. Growth for Asian carriers is perhaps a little higher than might have been expected, with 34.3% believing they would garner 5% or more growth. And of course, Middle Eastern airlines outstripped everyone else – 40% predict growth of 5% or more.

 

But how will this growth be won? Well, no one’s buying it in 2013 with only 6.8% of companies surveyed feeling acquisitive (see chart 4). Organic growth and new markets elicited the largest responses. Only one company mentioned service improvement, although new products accounted for the growth plans of 15.5% of respondents.

 

On the major trade lanes, our respondents expect to see growth in cargo traffic in each area – except on the Europe-Asia route, where a significant amount of respondents, nearly 60%, expect to see growth decline (see chart 5).

 

What’s the problem?

 

The problems for carriers in 2013 seem to be the same old story as last year: an unfortunate mix of overcapacity, weak demand and high fuel prices (see chart 6). Few believe that modal shift will be a big problem – which is surprising given announcements by manufacturers such as Philips that they are to phase out all use of air freight, while others have pledged to reduce it to a bare minimum. However, Ram Menen, senior vice president cargo for Emirates, says: “I’m not worrying about a loss of business to ocean, as long we can deliver our product faster. Time is critical. Life cycles, especially in technology, are very short and time to market is important.”

 

Monumental efforts by industry bodies such as IATA and the Global Air Cargo Advisory Group (GACAG), while not necessarily appreciated (see charts 11 to 15) may have paid off, as barely anyone (4.2%) thinks security is going to be a significant problem this year, although it is predicted to be the second biggest problem for airlines over the next 10 years (see chart 7).

 

One respondent, interestingly, notes that financing aircraft deliveries is going to be the single biggest difficulty this year, and it is certainly one that has been noted by carriers’ finance teams as challenging. Despite the high availability of aircraft at the moment and the consequently low price tags that some must be commanding, the banks aren’t as willing to lend as they once were.

 

Over the next 10 years, ever-rising fuel prices are the biggest threat, while modal shift finally enters the industry’s collective mind at fourth place, after the twin evils of security and overcapacity. The environment, which is surely going to become more problematic for airlines in the next 10 years, is still not on the industry’s radar, coming in on most respondents’ lists at numbers 5, 6 or 7. This, surely, is a statistic that has to be given more priority soon – especially when set against the background of the highest concern – the price of fuel.


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