Headwinds easing for air cargo

The air cargo industry certainly had a bumpy ride in 2019 due to the effects of the trade war between the United States and China, the deterioration in global trade, and a broad-based slowdown in economic growth. However, the International Air Transport Association (IATA) expects some small improvements for the air cargo industry in 2020. In its annual outlook, IATA has forecasted that the global airline industry will produce a net profit of $29.3 billion in 2020, well above the net profit of $25.9 billion expected in 2019.

If achieved, 2020 will mark the industry’s 11th consecutive year in the black. In 2019, air cargo traffic turned negative for the first time since 2012. The 3.3% annual decline in demand was the steepest drop since 2009 during the global financial crisis. Freight carriage slipped to 61.2 million metric tons (2018: 63.3 million tons). Cargo traffic is expected to rebound with 2% growth in 2020 while volume is predicted to reach 62.4 million tons. Yields will continue to slide (-3%), but more softly than in 2019 (-5%). Cargo revenues will slip for a third year in 2020 with revenues expected to total $101.2 billion (-1.1%).

In January 2020, IATA released data on the global air cargo market from November 2019, showing that demand, measured in freight ton kilometers (FTKs), decreased by 1.1% compared to the same period in 2018. This marks the 13th consecutive month of year-on-year declines in freight volumes.

By region, North American carriers saw a 1.1% decrease in freight demand due to slower growth in the U.S. economy and trade tensions with China. European airlines posted a 2.6% increase in freight demand for the same period. Better than expected economic activity in the third quarter in several of the Europe’s larger economies helped support demand.

Asia-Pacific airlines experienced a 3.7% decrease in demand, which was the sharpest drop of any region for the month. Nevertheless, the thaw in U.S.-China trade relations and robust growth in key regional economies are positive developments.

Looking ahead, China-based express carrier SF Airlines plans to launch scheduled and charter cargo flights between United States and Chinese destinations in 2020, after gaining approval for flights from the U.S. Department of Transportation. The new service is part of the airline’s international expansion strategy, after starting its services to Europe in 2019.

European ports still see solid growth
For the three major European container ports of Rotterdam, Antwerp and Hamburg, the year 2019 was mostly positive. According to the ports’ container volume data, for the first three quarters in 2019, Rotterdam and Antwerp recorded growth of 3.8% and 6.4%, while Hamburg increased container throughput by 6.9% and regained its market share.

“The significant increase in container handling at the port of Hamburg is primarily due to four new trans-Atlantic services that connect Hamburg with ports on the U.S. East Coast, Canada and Mexico,” says Axel Mattern, CEO of Port of Hamburg Marketing. “In the ranking of Hamburg’s most important trading partners, the United States has now risen from 17th to 2nd place in container traffic.”

Against the background of trade restrictions, Brexit, IMO 2020 and new customs regulations, the overall development has been surprisingly stable and even brought growth for the leading ports. According to Port of Antwerp CEO Jacques Vandermeiren, “The uncertainty in world trade has not yet had any impact on our container volume. In fact, it’s continuing to expand.”

In 2020, Vandermeiren says that the port will continue to improve sustainability and mobility by more efficient consolidation of freight traffic, further digitization of the port infrastructure and coordinated management of rail infrastructure.

Eyes on new markets
The “phase one” trade agreement negotiated between United States and China in December 2019 has led to a slight de-escalation in the trade war between the two countries—and brought with it a sigh of relief from the global transport and logistics industry.

However, hardly anyone really expects that trade relations between the two countries will be back to “normal” in the near future. Rather, it’s expected that the trade war between the United States and China will lead to changes in trade structures, with global importers having shifted sourcing from China to other countries such as Vietnam, Taiwan, Bangladesh and South Korea.

Thailand, Mexico and India are showing early signs of being next in line to benefit. India in particular has become very attractive, according to Steve Felder, managing director for Maersk South Asia. “As the global economy continues to face challenges, and trade tensions between major economies ensue, many leading global importers have begun exploring trade alternatives to China,” he says. The United States has emerged as a strong trade partner with India, showing growth in exports as well as imports. India boosted its ‘Ease of Doing Business’ in World Bank’s 2020 rankings. This provides a huge opportunity to entice multinationals and global investors to grow their trade with India.”

According to Maersk’s latest India third quarter trade report (July–Sept. 2019), the United States is still among the top trade partners for India and witnessed export trade growth of 12%, largely led by furniture, vehicles, textiles and apparel. Imports from the United States grew by 6%, largely driven by metals, plastic and rubber.

“The government has ambitious goals of reaching a $5 trillion economy,” says Felder. “To achieve this, there has to be a focused approach in implementing reforms and measure to drastically improve the landside infrastructure to boost logistics further and adopt digitalization as rapidly as possible.”

U.S. air carriers are also responding to these new market opportunities and expanding their service to India. Delta Air Lines Cargo recently launched its first nonstop flight between New York-JFK and Mumbai with a Boeing 777-200LR aircraft.

“This is an exciting new route for us and the extensive connections from New York really plays to our network strength in the United States, providing customers with significant opportunities for import and export in a market that is seeing huge growth,” says Gonzalo Hernandez of Delta Cargo Sales in Europe, Middle East, Africa and India.

https://www.logisticsmgmt.com/article/global_logistics_2020_mixed_feelings_permeate_operation