FIVE-YEAR AIR CARGO FORECAST IATA

Five-year Forecast Shows Improved Outlook for Air Cargo

Geneva - The International Air Transport Association (IATA) Airline Industry Forecast 2014-2018 shows that international freight volumes are expected to increase at a compound annual growth rate (CAGR) of 4.1% over the next five years. Emerging economies, particularly in the Middle East and Africa, will be the fastest-growing markets.

"Air cargo remains as vital to the global economic system as ever. This year, more than $6.8 trillion worth of goods, equivalent to 35% of total world trade by value, will be transported around the world by air. So it is welcome to see a forecast for a return to growth for the air cargo sector after several years in the doldrums. An average of more than 4% growth for the next five years would be a marked improvement on the performance of recent years. Since 2011, for example, growth in freight tonnes has averaged just 0.63% per year," said Tony Tyler, IATA’s Director General and CEO.

"Nevertheless, despite the positive picture, the overall risks to the economic outlook, and therefore to air freight, remain towards the downside. Trade protectionism is a constant danger. According to the World Trade Organization (WTO), between November 2013 and May 2014 alone, 112 new trade-restrictive measures were enacted by G20 governments. Geopolitical concerns, volatility of oil prices, and competition from rail and sea could also affect this forecast. The air cargo industry certainly cannot afford to be complacent," said Tyler.

To enhance air cargo competitiveness, the industry is aiming to cut average transit times by up to 48 hours by 2020. To achieve this, air freight is modernizing its processes, improving quality and reliability, and widening the range of services offered. A key component of modernized processes is the e-Freight project, which will render air cargo shipments paperless. As a first step, the industry is adopting the e-Air Waybill (e-AWB). In September 2014 global e-AWB penetration reached 19.4%, meaning the 2014 industry target of 22% is within reach.

Forecast Highlights:

• International freight volumes are expected to grow at a five-year CAGR of 4.1%.
• The United States, China and the United Arab Emirates (UAE) will each be adding more than 1 million additional tonnes of freight by 2018 compared to today. The UAE will have replaced Germany as the third largest market.
• The fastest growing international routes will be between the Middle East and Asia, at 6.2% per year. Within Middle East (4.6%), North America to South America (3.9%), and Europe to Southern Africa (3.8%), will also grow strongly.
• Significant volume imbalances will continue. The imbalance in flows from Asia to North America is estimated to be 1.1 million tonnes in 2018, and from Asia to the Middle East the imbalance will be 0.6 million tonnes.

International Freight Developments:

• The Middle East is forecast to be the fastest growing region over the forecast period with a CAGR of 4.7%.
• The second-fastest growing market, Africa, will have a CAGR of 4.4%. Asia-Pacific and Latin America, both with a CAGR of 3.8%, will be the joint third-fastest growing markets.
• The mature markets of Europe and North America will grow at 3.0% CAGR and 2.8% CAGR, respectively.
• By 2018, the ten largest international freight markets will be the United States (10,054,000 tonnes), China (5,639,000), the UAE (4,974,000), Germany (4,763,000), Hong Kong (4,648,000), Republic of Korea (3,487,000), Japan (3,480,000), the United Kingdom (2,808,000), Chinese Taipei (2,350,000) and India (2,223,000).
• Iran is expected to be the fastest growing country (of nations with more than 100,000 tonnes of cargo per year) for air freight volumes over the forecasting horizon with a CAGR of 7.0% per annum. However, it is growing from a low base so it will add just 44,000 tonnes of freight by 2018 for a total of 156,000 tonnes.
• The second fastest-growing market, India , will experience a CAGR of 6.8% to add 622,000 extra tonnes. Bangladesh (339,000 total freight tonnes), Ethiopia (319,000) and Nigeria (276,000) make up the remainder of the top five.
• Another notable growth country will be Qatar. With a CAGR of 5.7% it will be the sixth-fastest growing and it will see 361,000 additional tonnes to take its total freight tonnes to 1,484,000.

Freight Traffic Shares by Route Area:

• The largest freight traffic shares in 2013 were Within Asia Pacific (21.6%), Europe-Asia Pacific (12.3%), and North and Mid-Pacific (10.0%).
• Looking ahead to 2018, Within Asia Pacific and Europe-Asia are expected to increase their shares very slightly to 21.8% and 12.4% respectively. Middle East-Asia shows the largest gain, up 0.8 percentage points to 6.9%.
• Traffic shares for North and Mid Pacific, Within Europe and in the North Atlantic are all expected to decrease by at least 0.5 percentage points in 2018, to 9.5%, 9.0% and 8.9% respectively.