MADDENING CARGO

Global air cargo players can choose to view the industry’s future from two distinct vantage points: short-term and long-term. The views are so different, however, that trying to reconcile them is surely testing the sanity of cargo executives worldwide.

The former viewpoint is quite cloudy, with considerable near-term economic uncertainty reflected in falling airfreight traffic numbers. But the second vantage point is fairly bright, with long-term trends pointing to relatively strong air cargo traffic growth.

It is difficult for the industry to take comfort in predictions by Boeing and other forecasters that international air cargo traffic will grow more than 5% on average annually over the next two decades. That’s because the early 2030s—by which time forecasters believe there will have been a tripling of traffic—seem particularly far away from the perspective of cargo operators at the beginning of 2012, a year in which little is expected following a disappointing 2011.

As of mid-December, it appeared that international airfreight traffic would decline year-over-year on an annual basis in 2011 (probably by about 1%, according to experts) for the third time in four years—a hard-to-fathom fact given that before 2008, global air cargo traffic had declined on annual basis just once ever (2001). That the one year out of the last four in which traffic did rise (2010) produced a staggering 20% growth rate (compared to a historically weak 2009) only confuses industry executives further. How does a forwarder or an airline plan in such a volatile environment?

“There is just a lot of uncertainty [for air cargo operators] and that’s been the case the last 3-4 years,” said Air Cargo Management Group managing director Robert Dahl. “Every few months we seem to go through some sort of turbulence, creating a lot of uncertainty about where the global economy is headed.”

The airfreight industry is “the sharp head of the spear” of the cargo transport sector, noted Tom Crabtree, Boeing Commercial Airplanes regional marketing director and primary author of the manufacturer’s World Cargo Forecast. “When things start to turn around, it’s the mode most in demand. When things get soft, it’s the mode that shippers try to retreat from.” As a result, he said, “we’re seeing . . . an exaggerated impact of trends on the airfreight industry over the last 3-4 years.”

IATA signaled an alarm when it reported October 2011 traffic figures that featured a 4.7% year-over-year decline in global FTKs for the month and a drop of 0.2% for the 10 months ended Oct. 31. DG and CEO Tony Tyler said, “Since mid-year the [international airfreight] market has shrunk by almost 5% and this is far greater than the 1% fall in world trade [over the same time period].”

Others urged caution when discussing the 2011 air cargo traffic dip, following a big upswing in 2010.

“What’s happening now is a technical correction,” said Jack Gaber, VP and GM-market and business development for Israel Aerospace Industries’ Bedek Aviation Group, which performs passenger-to-freighter aircraft conversions. “Like in the stock market, whenever there is fast growth, there is a technical correction. I think this slowdown is occurring because growth was too high in 2010.”

Short-term, there is little confidence about global air cargo traffic growth prospects for this year. “The general consensus is that traffic levels in 2012 will not be much different than 2011,” Dahl said. “There’s hope that toward the end of the year there will be some signs that 2013 is going to be a better year.”

Conversely, long-term confidence is strong. “We’ve got roughly 40 years of history on our side,” Crabtree said. “Since 1970, there’s been 6.4% average [annual global air cargo traffic] growth. To be fair, that number drops to about 4.8% over the last 20 years. There has been a distinct weakening in airfreight growth over the last decade and we acknowledge that. But we are fairly bullish on the growth of airfreight.”

Dahl added, “As long as the globalization trend continues, we will have demand for freight transport and air will retain a portion of the market for high value goods . . .  [Historical analysis] suggests that global airfreight grows at roughly a multiplying factor of 2-to-1 compared to growth in global GDP. The economists looking forward still believe that GDP long-term will grow at roughly 3% a year. And so if that multiplier effect still applies, it’s logical to assume that airfreight will grow at 5%-6% per year . . . But there’s no guarantee that it’s going to apply going forward. Even so, I think it’s certainly logical to conclude that airfreight will grow on average, over the longer term, at least at the rate of global GDP. So somewhere in the 3%-6% range isreasonable.”