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To represent, lead and serve the airline industry
Understanding air cargo markets and their importanceNovember 2011Brian Pearcewww.iata.org/economics
What is driving air cargo?
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12
13
14
15
16
17
270
290
310
330
350
370
390
410
430
450
2007 2008 2009 2010 2011
FTK
s pe
r mon
th, b
illio
n
RP
Ks
per m
onth
, bill
ion
Total air travel and air freight volumesSeasonally adjusted
Source: IATA
FTKs
RPKs
It’s not relative transport costs
0
0.5
1
1.5
2
2.5
3
3.5
4
Sea Air
The cost of air freight versus sea, $/kg
14x
Shippers use air cargo only when they have to
Perishability (e.g. food, fashion)Opportunity cost (e.g. capital tied up in high
value product) Inventory-related cost (just-in-time)Time-definite requirements (express)50% ‘emergency’/ 50% planned (Merge
Global)
There are good leading indicators
‐40%
‐30%
‐20%
‐10%
0%
10%
20%
30%
40%
50%
2006 2007 2008 2009 2010 2011
Growth in air freight and the PMI index (advanced 2 months)
Growth in PMI index
Growth in air freight
But even they fail at major turning points
10
11
12
13
14
15
16
2007 2008 2009
Billion
s per m
onth
Freight tonne kilometers flown, seasonally adjusted
IATA forecastMarch 2008
‐25%
Even long-term trends are hard to get right
50
100
150
200
250
300
350
400
450
1990 1995 2000 2005 2010 2015 2020
FTKs billion
Long‐term cargo forecasts in 2000 and 2010
Boeing, 2000
Airbus, 2000
Airbus, 2010
Boeing, 2010
+45%
Where we are today
Population and purchasing power are the long-term pull factors for trade flows
Large cities too
Source: UN, SRS Analyser
5-10 mln10-15 mln15-20 mln> 20 mln
Urban Popn. 2015
No GDP ‘rules of thumb’ e.g. 5-6% cargo growth on 3% GDP growth doesn’t work
‐1
0
1
2
3
4
5
6
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
Ratio of FTK growth to GDP growth
%FTKs/%GDP
10‐year moving average
But can look directly at international trade
‐15%
‐10%
‐5%
0%
5%
10%
15%
20%
1970 1975 1980 1985 1990 1995 2000 2005 2010
Air freight and world trade growth
FTKsWorld trade
Air cargo has been losing share in world trade in the past 18 months
110
120
130
140
150
160
170
180
9
10
11
12
13
14
15
2005 2006 2007 2008 2009 2010 2011
inde
x of
wor
ld tr
ade,
200
0=10
0
Bill
ion
FTK
s
World trade in goods and FTKs by airSource: Netherlands CPB and IATA
FTKs by air(left scale)
World goods trade volumes(right scale)
For several different reasons
Mode shiftCommodity mixTrade lane
Mode shift - cyclical
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9
10
11
12
13
14
15
16
17
18
0.8
1
1.2
1.4
1.6
FTK
s (b
illio
n)
Inve
ntor
ies
to s
ales
ratio
Total Business inventories to sales ratio and FTKsSource: US Census Bureau and IATA
Inventories to sales ratio
FTKs
Mode shift - structural
Source: Seabury Cargo
The commodity mix has also weakened air cargo
-26-22-18-14-10-6-2261014182226303438
-34-26-18-10
-26
142230384654
Aug-03 Aug-04 Aug-05 Aug-06 Aug-07 Aug-08 Aug-09 Aug-10 Aug-11
% g
row
th -
Inte
rnat
iona
l FTK
s
% G
row
th, S
emi-C
ondu
ctor
Shi
pmen
ts
Semi-Conductor Shipments and Air FreightSource: IATA, SIA
International FTKs
Semi-Conductor Shipments
Major air cargo trade lanes weakened by consumers in Europe and US
Source: Merge Global
Consumer spending Directional air cargo flow
But air cargo and air transport connectivity is vital for modern economies
Businesses can set up much more efficient global supply chains
Dell manufacturing plantAustin, Texas
MexicoKeyboards
FranceSoundcards
ChinaPower supplies
Hong KongVideo Cards
Microprocessors
SingaporeSCSI CardsDisk Devices
JapanRAM Chips
CD-ROM Drives
TaiwanNetwork Cards
MonitorsCooling Fans
MalaysiaFloppy Drives
Critical value of air transport becomes clear when it is not there
Value of aviation campaign
Connecting cities enables flows of trade, tourists, investment and ideas