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Rising prices and a capacity shortfall could threaten vehicle production, warn experts. Rob Coppinger examines how the automotive cargo business is moving

With the global demand for automotive transportation growing, coupled with inadequate capacity and higher freight prices, there are no cheap solutions.

“The shortfall in air freight capacity from Europe into North America, in particular, could have connotations for ongoing vehicle production without steadfast contingencies,” warned Brad Brennan, Managing Director of emergency logistics specialist Evolution Time Critical, in a press release on 29 November 2017. For the freight industry, a sudden rise in world economic growth in 2017, and years of only bellyhold capacity increases, means every available aircraft and route is now needed or shipments could be going nowhere.

One reason given for this capacity shortfall is aircraft being booked up in advance for substantial flight programmes. “This has resulted in a decreased capacity for the charter industry, generally, to deliver ad hoc work to the automotive industry,” says aviation services specialist Air Partner’s Director of Freight, Mike Hill. “This was particularly the case in the last quarter of 2017, which faced a decreased charter capacity due to the return of the peak season from the Far East.”

The world economy is growing at a faster rate than it has done for many years. The recorded global freight tonne kilometres (FTKs) results for November 2017 show an increase of 8.8%, year-on-year, according to the International Air Transport Association (IATA). In IATA’s Air Freight Market Analysis for last November, the aviation body said that in 2017 cargo remained “on track for their fastest full year of growth since 2010.”

Supply chain solution firm Panalpina, in a December news item on its website, said of 2017, "[it] has been an exceptional year for air freight. The market has developed a new dynamic characterised by tight transport capacity and sustained high freight rates.” The company expected a very busy peak season in 4Q17, and reported that in October and November it recorded its highest ever monthly volumes.

With that worldwide economic expansion and FTK hike, IATA saw air freight from Europe to North America grow by about 10% from January to October last year. Only Europe to Asia and Asia to North America grew faster, at about double that rate with 20%. The situation is very different to the industry’s experience in recent years.

Two years ago, the industry was facing two problems, little demand growth, but more hold capacity. In 2015, the Association of Asia Pacific Airlines was reporting only a modest rise in cargo demand, and for a region that led world economic growth after the financial crash of 2008. While air freight’s recovery was slow, passenger seat kilometres were experiencing growth as good as any in the history of air transport.

The aircraft that were being ordered to meet this passenger demand were the Boeing 777, Boeing 787 and Airbus A350, all of which have substantial bellyhold capacities. After a full load of passengers’ baggage is put on board, there is still 15-20 tonnes of cargo capacity left. Two of these aircraft almost equal the traditional freighter capacity of about 45 tonnes. This capacity increase at a time of demand stagnation had left freight prices depressed. The result was that cargo related revenue, worldwide according to IATA’s data, was going to be $62 billion for 2015, $1 billion less than 2014.

However, since 2016, IAG Cargo has seen similar double-digit growth in the automotive commodities it has shipped. “What we've seen in the last couple of years, if I look back to 2016, we did see growth on our own metal from the automotive industry,” says the airline’s Manager Global Products, Daniel Johnson.

“In terms of the commodities that we were moving, at the time, we believe there was probably about a 20-22% increase in automotive parts, components.”

While this has been IAG Cargo’s experience, other estimates for the automotive sector put its growth far lower. According to AirBridgeCargo Airlines, the automotive sector has not quite reached the level of 10% or anywhere near 20%, but will register above 5%. AirBridgeCargo General Director, Sergey Lazarev, says: “We expect to see a continuation of air freight demand from the automotive sector, and that it will grow by more than 5%.” Lazarev sees this figure of over 5% as conditional on the success of major car manufacturers in releasing new vehicle updates, “the likes of BMW, Daimler, Volvo, Nissan, and others,” he points out.

Air Partner also saw a buoyant automotive business in 2017, which Hill describes as, “outperforming 2016, particularly in terms of client transport requirements.” Hill expects the tempo of 2017 to continue through 2018 for his firm. >>


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