By Glyn Hughes, director general, TIACA

Each month the industry eagerly awaits the release of industry data to assess how global volumes and yields are comparing to the prior period and prior year.

The numbers for the first six months of 2024 would indicate that air cargo volumes have not just returned to pre-Covid levels but in fact the industry has moved on beyond them with the last six months showing double-digit growth compared to 2023.

But will this well-received growth continue? The answer to that question is not easily addressed.

Let’s start with what we do know

November 2023 saw Houthis in Yemen announce they would attack commercial ships associated with Israel, US and Europe sailing through the Red Sea in response to Israel’s military action in Gaza.

Up to the middle of July, Bloomberg reports that there have been over 65 reported incidents with 18 ships having been struck with missiles. Despite military action targeting the missile launch sites the attacks continue.

Maritime analysts and risk assessors suggest that the attacks will likely to continue for the remainder of 2024 and into 2025.

Maritime operators have stressed they will not return to the shorter more efficient Red Sea shipping lanes until it is safe to do so for crew and cargo.

The consequential impact on journey times from Asia to Europe and on overall shipping costs has resulted in the air cargo/maritime differentials narrowing.

A more competitive air cargo industry results in increased volumes. Shortages in shipping containers also promotes a shift to air cargo.

Let’s now look at the global economy

According to the latest analysis from the IMF the global economy continues to improve;

Global Growth Steady Amid Slowing Disinflation and Rising Policy Uncertainty 

Major economies are becoming more aligned, but the world’s medium-term prospects remain weak.  Our (IMF) global growth projections are unchanged at 3.2 percent this year and slightly higher at 3.3 percent for next year, but there have been notable developments beneath the surface since the April World Economic Outlook.

The IMF forecast indicates that growth in major advanced economies is becoming more aligned as output gaps are closing.

The US shows increasing signs of cooling, especially in the labour market, after a strong 2023. Meanwhile, the euro area, is poised to pick up after a nearly flat performance last year.

With Asia’s emerging market economies remaining the main engine for the global economy it bodes well for air cargo growth. GDP forecasts for India and China have also been revised upwards and accounts for almost half of global growth.

With this backdrop, the IMF has revised its GDP forecast for 2024/2025.

With global economic prospects looking favourable we can expect the demand for traditional air cargo commodities to remain strong for the remainder of 2024 and into 2025.

The e-commerce effect

Lastly, let’s look at e-commerce which accelerated exponentially during the Covid period as global consumer bases were restricted to shopping from home.

This new wave of consumer activity has continued on its growth trajectory and today accounts for roughly 20% of total air cargo volumes. This number is projected to grow to about 30% by the end of the decade.

It is estimated that e-commerce accounts for about the equivalent of 100 747s of capacity each day.

This brings a new type of demand for operational processes with speed, transparency, and integration with first and last delivery mechanisms playing an increasingly important role.

In addition to e-commerce growth, pharmaceutical shipments are growing steadily as more people around the world embrace modern medicine with personalised healthcare based on individual treatment programmes expected to increase further in coming years.

Perishables, including fresh meat, fruits, vegetables and flowers have also shown strong resilience and growth with enhanced focus on eliminating waste and spoilage throughout the supply chain.

Production and manufacturing centres have also seen some shifts with supply chain de-risking strategies being deployed. China continues to be the main centre of global manufacturing but significant investment has been made into India, Mexico, Vietnam and other areas in southeast Asia as well as some other instances of near or friend shoring. As production centres fragment, the need for air cargo and maritime supply chains increases to smooth out this new complexity.

It is also worth noting that the global affluent middle-class community has grown by several hundred million people in the last five years, predominantly in Asia, and they collectively bring additional demand for the consumer goods which are the mainstay of air cargo movements.

To conclude

The prospects for full-year air cargo growth in 2024 looks exceptionally promising, although perhaps we may see year-over-year comparisons slowing as we get into Q4.

Capacity could become tight as the peak period in Q3 is already seeing some advance contracts being signed.

Going forward the industry must ensure that air cargo in 2024 and beyond continues to evolve as the global economic conditions evolve.

Efficient operations require embracing technology at a greater pace than previously and infrastructure must continue to be invested in to meet the increasingly sophisticated needs of today’s cargo.

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