Africa’s slice of US$6.2 trillion global air cargo up for grabs

Home Business Africa’s slice of US$6.2 trillion global air cargo up for grabs

Edgar Brandt

The value of cargo goods transported globally by air is expected to rise to US$6.2 trillion in 2018, about a third of global trade volumes, and African airlines have been encouraged to take advantage of this increase, particularly through the soon to be implemented Single African Air Transport Market, which is expected to come into force in January 2018.

The Single African Air Transport Market, which currently only includes 23 of the 54 African countries, is aimed at creating a single unified aviation market on the continent and, together with the liberalisation of civil aviation regulations, is seen as a major potential driver of the continent’s economic integration agenda.

In fact, at last week’s International Air Transport Association (IATA) Cargo Day in Geneva, Switzerland, IATA’s chief economist, Brian Pierce, confirmed that air cargo remains a key driver for economic development but noted that some borders are becoming more difficult to cross, which is a major challenge for an industry that depends on open borders.

Pierce further pointed out that whilst global cargo performance is in the midst of a strong economic upturn, driven mainly by e-commerce, current demand for air cargo is actually growing faster than available capacity.
Pierce went on to say that due to the state of affairs, airlines’ asset utilisation has improved substantially, as 2017 cargo revenues were up 15 percent and growth is expected to continue into 2018, leaving the heads of air cargo operators confident about 2018 markets.

According to IATA, African carriers had the fastest growth in year-on-year freight volumes, up 31.6 percent in June 2017, while capacity had increased 7.6 percent. While seasonally adjusted growth has levelled off in recent months, the growth in the continent ‘s airfreight market is set to remain in double digits for the remainder of 2017.

Despite this, many analysts feel the continent continues to face enormous challenges in its air-cargo development strategy due to the lack of liberalisation, restrictions on traffic rights, limited intra-Africa connectivity, lack of co-operation between African airlines, high costs and taxes in fuel and airport services, inadequate infrastructure and lack of capacity building and training.

Speaking at the opening of the Cargo Day at IATA’s offices in Geneva on Wednesday, IATA director general and CEO Alexandre De Juniac said that while cargo is expected to return to profitability, the sector still faces crucial challenges, such as lack of innovation and digitalisation and still has quite a long way to go to establish a seamless process.

IATA’s senior vice president for airport, passenger, cargo and security, Nick Careen, acknowledged that while the cargo sector has the advantage of speed, it is now working to improve quality, as well.
He added that while institutions – like IATA – are trying to push the cargo industry to change faster, they need to be cognisant of e-commerce and its overall impact on the cargo business.

In general, the global cargo business continues to benefit from a strong cyclical upturn in volumes, with some recovery in yields. Volumes are expected to grow by 4.5 percent in 2018 (down from the 9.3 percent growth of 2017).
The boost to cargo volumes in 2017 was a result of companies needing to restock inventories quickly to meet unexpectedly strong demand. This led cargo volumes to grow at twice the pace of the expansion in world trade (4.3 percent).

Cargo yields are expected to improve by 4 percent in 2018 down from 5 percent in 2017). While restocking cycles are usually short-lived, the growth of e-commerce is expected to support continued momentum in the cargo business beyond the rate of expansion of world trade in 2018.
Cargo revenues will continue to do well in 2018, reaching US$59.2 billion (up 8.6 percent from 2017 revenues of US$54.5 billion).

In 2016, airlines transported 52 million metric tonnes of goods, representing more than 35 percent of global trade by value, but less than 1 percent of world trade by volume.

That is equivalent to US$6.8 trillion worth of goods annually, or US$18.6 billion worth of goods every day. On average, cargo business generates 9 percent of airline revenues, representing more than twice the revenues from the first-class segment.
Photo: Cargo