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Air cargo 2020: a combination of luck and strategy to sort the best from the rest

usscmc by usscmc
December 23, 2019
Air cargo 2020: a combination of luck and strategy to sort the best from the rest
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jet plane take off from urban airport runways use for air transportation and business cargo logistic industry

© Khunaspix

By Alex Lennane

23/12/2019

2019 is not going to go down in history as a year anyone in air freight will particularly want to remember.

It started with some optimism – IATA forecasting 3.7% growth; although after a flat November 2018, it did acknowledge that “downside risks are mounting”.  

The optimism didn’t last. In March, IATA downgraded its forecast to 2% – and in June it reassessed, suggesting 0% was more likely.

In fact, however, even 0% turned out to be wildly optimistic; it looks as if the air cargo market in 2019 was down 3.3% overall, with yields also in decline. 

Industry sources suggested that the harm was evenly spread between forwarders and airlines, with contracted rates giving carriers a safety net. But airlines chased business as hard as they could through the year to mitigate against low volumes. Even Lufthansa, generally a carrier which tries to uphold rates, was offering low prices to customers.

Other carriers, notably AirBridgeCargo (ABC) and its airline siblings, are expected to see severe losses from this year. Not only did ABC, Volga-Dnepr and Cargologicair reduce their fleets, and cut staff, but it looks extremely unlikely that ABC will take three 777s, due to be leased from Dubai Aerospace Enterprise, next year. Some sources have suggested losses at the group could be in nine figures, although this has not been verified. 

And there was little succour in the final quarter. One Asian carrier was offering spot rates way below slack season rates in November and December in a bid to break even via bigger volumes. According to the latest data, while there has been a slight recovery, “peak” was way too strong a word to use for the volumes of the past two months. 

However IATA has, with the assumption of a trade war ‘truce’, forecast 2% growth in 2020, so still below 2018. Forwarders have been shying away from blocked space agreements and more are said to be looking to take their chances on the spot market next year.  

Capacity–wise, there were few large freighter orders, and many airlines accelerated the retirement of older aircraft, such as Lufthansa. Airlines appear to have improved the supply/demand equation, and this looks likely to continue. 

Outside of the rate and volume market, carriers (and forwarders) have certainly stepped up the pace in digitisation. Increasing numbers are now offering API and online booking with real-time dynamic rates. This too will continue apace in 2020. 

Sustainability is likely to be far higher up the agenda too: TIACA’s new initiative; flight-shaming; and customer concerns will see environmental issues become far more acute in 2020 – and airlines will need to start providing answers and solutions. They will also need to persuade customers that there is more to saving the planet than aircraft emissions alone – plastic reduction, lower ground emissions – there are numerous ways companies can make changes.  

Of course there are many macroeconomic and political factors outside the industry’s control which will have a great bearing on 2020. Will Trump’s trade war end – or take in more countries? Will Brexit alter the market? Is globalisation reaching a plateau, with regional supply chains more likely to flourish? How will e-commerce affect traditional supply chains and transport modes?  

And then there are things the industry can control. Are the right people at the top to properly navigate their companies? Are the right strategies in place? Has enough been invested in technology? 

As ever, it’s likely to be a combination of luck and strategy that sorts the best companies from the rest.  

But let’s hope that 2020 sees, as IATA suggests, a “fragile recovery” at least, and at best a cracking market for all to enjoy. 

Wishing you and yours a great holiday, and a very happy 2020. 

usscmc

usscmc

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