03 Jan Crystal gazing Air Cargo industry for Cost Effectiveness and Efficiency improvement in 2030
The future is looking bright for air freight. There was a positive outlook for profitability in 2018, which was supported by robust demand growth on both the passenger and freight sides of the business says International Air Transport Association (IATA). Air Cargo industry experienced flat volume growth for the past few years and the same continued in 2019 too. Going forward, IATA expects similar numbers in a marginal downward swing for 2020.
However, there are two areas of change which could impact the industry and its potential profitability. These are regulations and technologies that either can throw multiple wrenches in the works for air freight or improve efficiency and cost-effectiveness to the point where it becomes the method of choice for sending goods across the globe. Some of the future trends that would shape up the Air Cargo industry are as mentioned below.
Global trade protection
Global trade protectionism is expected to influence the growth percentage of cargo tonnes carried by air in the coming decade. This will be spearheaded by the increase in smart, balanced and most importantly data-driven regulation in the Air Cargo industry.
E-commerce has increased in the last 15 years by 20% year-on-year and is forecasted to continue at a growth rate of between 10% and 15% over the next 10 years, according to McKinsey & Company. Cross border e-commerce, expanding quicker than overall online sales (at a rate of about 25% a year) is expected to present a sizeable opportunity for Air Cargo charter.
Growth of Asian Economies
Asia will continue driving the world in average annual air cargo expansion, upheld by more quickly developing economies. China, intra–East Asia, East Asia–North America, and Europe–East Asia markets are altogether expected to become quicker than the world normal development rate, showing that business sectors inside, serving, and interfacing with Asia will lead development in the following decade and past. Also, Middle East and Africa continue to be potential hubs for Air Cargo, with a lot of connectivity being build.
Trade wars and uncertainties impacting consumer confidence
Consumer Confidence is wavering, with trade wars between the USA and China. Trade war between USA and China is intensifying and Air Cargo is facing strong headwinds due to the same. Also, weakness in some of the key economic indicators and rising political uncertainties worldwide.
Cold-chain Logistics and role of e-Commerce in Air Cargo
Integrators like Amazon, Alibaba, and eBay are setting up their Air Cargo hub network. By 2020, IATA forecasts biopharmaceutical cold-chain logistics spending to surge by 8-9 per cent, and biopharmaceutical sales to go up by 4-5 per cent. Europe and North America continue to be the leading market for biopharmaceutical with a market share at 60 per cent. Although cold-chain logistics spending is predicted to grow fastest in Asia and North America.
Ofcourse, Digitisation will hold the key. Several airlines worldwide have begun to cut traditional paper-based systems by inculcating the use of digital processes, including digital devices that measure ULDs, apps for dangerous goods declarations and online platforms for booking and tracking shipments in real-time. Forwarders, integrators, and Airports as well as other authorities are also investing heavily in technology. Most importantly, Airports need Ground Handlers as well as providers to reserve slots via a digital platform.
Digitisation will increase efficiency, lowers cost and carbon footprints through visibility and data-sharing. The use of air freight management software is already in the rise and in the coming days we can expect the same to rise further and further. Also, know how the African Air Cargo industry is growing exponentially to become an enabler.