Current State of the Air Cargo Industry Heading into 2018

by Marketing | Mar 20, 2018 | News

The air freight industry has experienced some radical shifts throughout the years, and 2018 will be no exception. Headwinds are in store for international air freight transporters as they manage available air capacity, especially during peaking season. Capacity is likely to become harder to find. If large shippers acquire a larger slice of the available capacity, small and medium-sized shippers will find it more problematic to secure air space for their freight. Peak season will also add more pressure on available capacity. At certain times of the year, there is more freight flowing than capacity putting even more pressure on supply chains.

The International Air Transport Association (IATA) confirmed full-year 2017 data for global air cargo markets reporting that demand grew by 9.0%, which was double the annual growth recorded in 2016. This outperformed the industry-wide growth in both cargo capacity and in passenger demand. There were improvements in load factors, yields and revenues. Air cargo is still a very hard-hitting and competitive business, but the developments seen in 2017 far exceeded expectations.

Regional Performance
Airlines in all regions reported an increase in demand in 2017:

• Asia-Pacific carriers saw demand in freight volumes grow 5.6% in December 2017 compared to the same period in 2016 and capacity grow by 2.2%.
• North American airlines saw freight demand increase by 5.4% in December 2017 year-on-year and capacity increase of 2.2%.
• European airlines posted a 5.0% year-on-year increase in freight demand in December and a capacity rise of 3.2%.
• Middle Eastern carriers’ freight volumes increased 6.3% year-on-year in December and capacity increased 4.7%.
• Latin American airlines experienced a growth in demand of 4.9% in December and a capacity increase of 11.6%.
• African carriers’ posted the fastest growth in year-on-year freight volumes, up 15.6% in December 2017 and a capacity increase of 7.9%.

Total air freight traffic market shares by region in terms of freight ton kilometers (FTKs) were: Asia-Pacific 37%, Europe 24.2%, North America 20.5%, Middle East 13.7%, Latin America 2.7%, Africa 1.9%.

Over the last few years, the evolution of digitization within the air industry has steadily increased. As in most businesses, big data obtained in real time, from real events, combined with flexible management, is better serving air carriers to take a more competent approach to traffic preparation and infrastructure.

Top 5 air freight logistics tech trends for 2018
It’s March of 2018 and the e-commerce-driven demand for airfreight show few signs of reduction. While the overall position for the year is generally positive, there are still various holdups in the supply chain that need to be addressed, including amplified safety and transparency, enhanced product quality and quicker processing of cross-border deliveries. Fortunately, there are numerous technology firms willing to help forwarders, carrier and shippers resolve these issues and strengthen the overall efficiency of air cargo transport.

According to Air Cargo World, here are the top 5 tech trends to look out for in 2018:

• Flexible warehousing. Today’s warehouses have been altered into dynamic avenues of logistics activity. It’s no longer about just one big building, but a network of large and small facilities tactically placed to serve the changing needs of customers. The warehouses of tomorrow are more and more dependent upon robotic vehicles and are intended to be customizable to meet today’s on-demand desires, serving as both retail channels and e-commerce distribution centers.
• Interest in blockchain technology. Blockchain is the air freight catchword that refuses to go away – primarily because there is so much potential for it to drive and secure the mechanics of the supply chain. By creating a shared, automated record of all the dealings that occur in a network, blockchain technology allows trusted parties limited admission to data in real time. The companies that hope to present the technology as a way of digitizing global cross-border trade say it’s one of the best methods to reach transparency without compromising security or privacy.
• The Internet of things. The IoT is still acquiring enough traction in the logistics field that we may begin to see some extensive implementation this year, using fixed technology such as radio-frequency identification (RFID) and GPS tracking systems. Since air freight involves the movement of so many concrete items – from ULDs to trucks to 777s – it is complementary to IoT technology.
• Unmanned Arial Vehicles (UAVs). Small drones designed to deliver minor, high-value merchandise, such as pharmaceuticals to remote hospitals, have been around for years. All of them are hindered by the same restrictions from most world regulatory agencies that ban their use beyond line-of-sight piloting and above a few hundred feet, out of concern for public safety. This is a major issue, and finding a sensible accommodation will be crucial to development. The types of drone aircraft being conversed this year are not the same as the little quad- or hex-copters favored by hobbyists. For 2018 the discussion will shift to much larger machines, capable of carrying larger payload several kilometers away.
• Artificial Intelligence. There is great potential for Artificial intelligence (A.I.), which integrates the collected “big data” from the supply chain and uses machine learning to recognize unseen patterns of daily e-commerce. With the overwhelming capabilities of the newest data-driven analytical software, shippers and forwarders may soon be able to predict bottlenecks like weather events, traffic slowdowns and other unforeseen variables that can hinders the supply chain. A.I. can also be used for anticipating not just possible problems, but future buying patterns, so shippers can better evaluate when certain goods will be most prevalent and can respond rapidly to move these commodities to distribution center closer to their clients.

Looking Ahead
Understanding the trends and opportunities will be the key to maintaining stability in 2018. Start by evaluating your current transit times and deliver dates, and assessing how they influence your ability to implement an effective air freight strategy. Many businesses discover that broadening transit times alone can often save between 15% and 20%.

You can also choose to do business with a large, stable freight forwarder, who can help you navigate the challenges of finding space availability, especially during peak shipping season. Let Logistics Plus be your trusted partner in navigating the ever changing and increasingly complex air freight and cargo environment!