Air Cargo Flying Through Challenging Times

Post By : News Desk
Post Date : October 15, 2019
Share with
Reading Time: 4 minutes

The ongoing tariff war between US and China is showing no signs of mitigation. Prevailing trade tension has been throwing air cargo business out of gear as the sector heavily depends on various external and geopolitical factors. Recently released figures of IATA suggest that the Asia-Pacific market has witnessed a decline of 4.9% FTK in the month of July on a year-on-year basis. The present situation is certainly impacting the Indian air cargo sector. Logistics Insider, in this special report, tries to analyse the impact of the slowdown in the air freight sector on the Indian market, with the help of expert opinions from key stakeholders.

The global economy is languishing. The domino effect has sent the prospective markets in jitters. A low demand has pushed the watchdogs of air cargo market to repeatedly issue cautions about the future of the industry and possible changes to keep the businesses from reaching a trough line.

The monthly report of International Air Transport Association (IATA) in July this year showed that the air freight demand, measured in Freight Ton Kilometers (FTK), contracted by 3.2% compared to the same period in 2018. This marks the ninth consecutive month of year-on-year decline in freight volumes. The association recently decreased its air cargo demand growth forecast for 2019 from 3.7% to 2% year-on-year.

The Asia-Pacific and the Middle East markets were most affected. The Asia-Pacific market which represents 35% of the total global FTK has witnessed a decline of 4.9% FTK in the month of July on a year-on-year basis.

Preliminary figures of the month of August released by the Association of Asia Pacific Airlines (AAPA) also repeated the same tale of falling demand figures. According to AAPA, air cargo demand measured in FTK fell by 6.4% year-on-year in August.

In 2018, a joint study of Assocham and consultancy firm Auctus Advisors found that the Indian air cargo sector needs to grow at the rate of about 12.9% to achieve the goal of 10 million tons by 2027 as envisioned by National Civil Aviation Policy.

Airports Authority of India (AAI) reports show that air freight handled at Indian airports grew by more than 20 times from 0.08 million metric tonnes in 1972-73 to 2.5 million tonnes in 2014-15, and its compound annual growth rate (CAGR) was 8.8% during 2013-14 to 2016-17.

The report said that international and domestic air freight is projected to grow at an overall compounded annual growth rate (CAGR) of 8.2%. If the projected rate had continued till 2027, projected international and domestic air cargo will be 3.6 million tonne and 2.1 million tonne, respectively, resulting in total air cargo traffic of 6.8 million tonne.

CRISIL, in June this year, estimated that the domestic air freight demand is expected to touch the mark of 1.1 million tonne by 2025 at compounded annual growth rate of 7% – 9%.

Experts’ Take on the Current Situation:

“There was a steep decline in India’s air cargo demand in July 2019. Overall, India’s international air cargo volumes fell by 5.2% as compared to the same period in 2018. Air cargo demand is typically seen as a forward indicator, of not just the airline industry, but where the economy generally is heading.” ~ Sam Katgara, Partner, Jeena & Company

“There is certainly a fall in demand around the world. The consumer sentiments are impacting the big buyer’s sourcing patterns. They are procuring with caution and also using ocean freight due to slower sales and apt inventory levels.” ~ Yashpal Sharma, Managing Director, Skyways Group

“Cathay Pacific’s cargo revenue in the first half of 2019 was HK$ 11,498 million, a decrease of 11.4% compared to the same period in 2018. The US-China trade tension is the reason behind it as the air cargo sector is an extremely volatile market.” ~ Rajesh Menon, Regional Head of Cargo – South Asia, Middle East & Africa, Cathay Pacific Airlines

“Locally, we have seen a limited impact on our payloads. However, this is normal given market fluctuations. In Africa, demand has continued as expected, especially with perishable commodities.” ~ Shankar Iyer, Director Cargo – India, Middle East and Africa, SwissWorld Cargo

“The impact on air cargo Industry is primarily happening because of very weak demand of products overseas especially of high- end products. Hence, falling demand of high\value commodities are putting direct impact on the air freight volumes.” ~ Sunil Arora, President, Air Cargo Agent Association of India (ACAAI)

“Union government should work towards creating infrastructure to support growth in the Indian air cargo sector. Focus should be laid on creating dedicated cargo airports at the place of undertaking just patchwork kind of infra projects. Tier II and Tier III cities of the country are the new potential markets which should be explored intrinsically.” ~ Abhay Pathak, Former Executive Director (Cargo), Air India

“In FY 2019-20 the overall volume of air freight during the month of April-July corresponding to a similar period in 2018- 19 has shown 5% negative growth. This situation may further deteriorate if the trade war between the US and China does not improve and the demand of Indian goods does not increase.” ~ KS Kunwar, Director General of Air Cargo Forum of India

This is an abridged version of the full story. To read the full story, get your digital copy now. Or click here, to subscribe to the print edition of Logistics Insider magazine.

Leave a Reply

Your email address will not be published.