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Cargo

Trading up

Demand is beginning to pick up in the transatlantic air cargo market, boosted by e-commerce, temperature-sensitive pharmaceuticals and fashion, as Kerry Reals finds out
 

Following a prolonged period of difficulty in the global air cargo market, there is a tentative optimism in the air among carriers with extensive transatlantic operations. However, the looming spectre of a return to trade protectionism in the US is casting shadows of doubt over these early signs of a transatlantic resurgence.

 

IATA announced in early March that global air freight demand – measured in freight tonne kilometres (FTKs) – had risen by 6.9% in January compared to the same month a year earlier. This came against a 3.5% reduction in available FTK capacity. 

 

While January’s growth was down from the 10% annual growth recorded in December 2016, IATA points out that it was “well above the average annual growth rate of 3% over the past five years”. The continued positive momentum in freight growth into 2017, says IATA, coincides with a steady rise in new export orders, which reached their highest level in February since March 2011.

 

But despite this positive trend, the trade organisation sounds a clear warning bell about what it describes as “the pick-up in populist and protectionist rhetoric”, which it says “presents an ongoing risk for global trade and air cargo in the years ahead”.

 

In the US, recently-inaugurated President Donald Trump has made it an early priority to withdraw from the Trans-Pacific Partnership (TPP) trade deal and renegotiate the North American Free Trade Agreement (NAFTA). 

 

Meanwhile, across the Atlantic, there is continued uncertainty about the trade implications of the UK’s decision to exit the European Union. Former UK chancellor George Osborne argues that leaving the EU without a trade deal would be “the single biggest act of protectionism” in the country’s history.

 

Speaking in March at the World Cargo Symposium in Abu Dhabi, IATA Director General and Chief Executive Officer Alexandre de Juniac said: “We must all be concerned about the protectionist rhetoric that is spreading. Aviation is the business of freedom. The industry is premised on borders that are open to people and trade. That is at the heart of the important role that we play in globalisation.”

 

He urged the industry to “join forces to remind governments of the benefits of globalisation”. While IATA highlights fast-growing sectors such as cross-border e-commerce and pharmaceuticals as offering opportunities for the air cargo industry, it notes: “The question is whether such areas will allow air freight to de-couple from global trade trends on a sustained basis in the future.”

 

Delta Air Lines appears unfazed by the uncertainties highlighted by IATA, pointing to strong demand for air cargo services from several European markets to the US. On the subject of the Trump administration’s new trade policies and how they could impact the transatlantic market, President of Delta Cargo Gareth Joyce says: “It’s business as usual for Delta. The US administration changes every four years and we work with the administration for the benefit of our customers and employees.”

 

However, Delta’s joint venture partner, Virgin Atlantic Cargo, affirms that trade restrictions are not good news for the sector as a whole. Director of Cargo John Lloyd says: “The introduction of any restrictions on imports of certain goods, and/or tariffs, would have a detrimental impact on the demand for transport by air.” >>


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