Air cargo leaders call for action across supply chain

Policy Pulse - 27 November 2019 - Veritas Global Announcement

Air cargo industry leaders and shippers call for closer collaboration in the face of an uncertain global economy. The call to action was made during The International Air Cargo Association (TIACA) Executive Summit in Budapest on 21 November 2019. Summit participants emphasized that volatility in the global economy would persist even as expectations improve – over 7 in 10 executives anticipate an improvement in global trade in 2020. However, the operating environment remains challenging while at the same time shippers continue to stress the need for better service quality from the air cargo supply chain.

Demand continues to grow for high quality, rapid and reliable logistics services. However, gaps in information sharing, lack of transparency and legacy processes have translated to lost opportunities and more volatility for the air freight business. “Air cargo is an attractive product. But it is only as strong as its weakest link.” said Vladimir Zubkov, Secretary General of TIACA. Airports, airlines, ground handlers and freight forwarders need to do more to ensure smooth and tailored handling of air cargo. “There is an immediate need to step up collaboration across the air cargo supply chain,” said Zubkov.

Leaders emphasized that governments play a critical role in reducing volatility through creating an enabling environment for the sector, which empowers economic development. “Better air cargo connectivity lifts more than just payload, it lifts people out of poverty and helps countries move up the value chain,” said Glyn Hughes, Global Head of Cargo of the International Air Transport Association. The opportunity to propel progress is highest in Africa. It is encouraging that African airlines have the highest air cargo growth rates and medium-and-long term prospects look promising. The recently agreed African Continental Free Trade Agreement will further accelerate trade growth. “Africa has moved from talk to action, the continent-wide free trade agreement, the protocol on free movement of people, and a shift of focus to implementing intra-African air transport liberalization will be transformative,” said Abderahmane Berthé, Secretary General of the African Airlines Association.

Leaders highlighted that technology can help manage volatility through supporting greater agility. While specific technology solutions may differ, having a common reference across supply chain operations was identified as critical. “Having a common reference point is like being able to speak the same language. It makes it possible to have a conversation about what is good and what is bad,” said Lars Magnusson, Business Architect of Ericsson. The leaders also stressed that if negative perceptions about the sustainability of air cargo were left unaddressed, it could lead to costly policies being imposed and customers turning away. This could also contribute to volatility. The leaders recognized that the extraordinary climate agreement on international aviation could serve as a valuable example for the broader air cargo supply chain. However, leaders emphasized the need for a comprehensive approach that encompasses social, environmental and financial sustainability.

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#logistics #innovation #economics #supplychain #aviation #TIACA #IATA #AFRAA #Ericsson #shippers #airlines #forwarding #groundhandling

Air cargo executives signal optimism for 2020

Policy Pulse - 25 November 2019 - George Anjaparidze

A poll of executives attending the TIACA Executive Summit suggests improving conditions for air cargo in 2020. The Veritas Global poll, held in Budapest on 21 November 2019, reveals that 72% of executives expect an improvement in global trade in 2020. While 28% expect a deterioration in the outlook with a downturn in global trade.

Expectations of air cargo executives for global trade in 2020

Source: Veritas Global. Note: each icon represents 10% of executives participating in poll

Sentiment of executives expecting improvement

67% of executives expect a moderate acceleration in trade. With accommodative monetary policy being the key enabler for the improvement in economic conditions. This assertion is in line with data tracked by the Council on Foreign Relations through the Global Monetary Policy Tracker. It tracks monetary policy conditions across 54 economies and shows that current monetary policy easing is near levels observed during the financial crisis.

5% of executives expect a strong upturn in global trade, which could be made possible if the accommodative monetary policy stance is combined with an easing in trade tensions and reduced policy uncertainty. Under this backdrop, there is also an expectation that investors and corporations would start to spend their cash reserves on investments, thereby having a particularly favorable impact on trade.

Sentiment of executives expecting deterioration

28% of executives were expecting a downturn in world trade, due to escalating trade tensions, rising protectionist measures and the possibility of geopolitical disruptions.

Background to poll

Prior to the poll, George Anjaparidze, CEO of Veritas Global, highlighted the rise in volatility and pointed to concerning performance of leading indicators (new export orders and economic policy uncertainty). However, the outlook was not entirely negative as there was room for some cautious optimism for Q4 of 2019. The assertive response of Central Banks to the IMF decision to cut global economic forecasts, could help improve the economic backdrop. Following the October IMF World Economic Outlook report, Central Banks further loosened monetary policy and communicated that they would not tighten any time soon. This should reflect positively on the near-term outlook. Expectations for overall 2019 air cargo traffic performance is to have negative growth in low single digits (3-4%). However, performance should improve in Q4 of 2019 and compared to Q4 of 2018 there is even a reasonable possibility that growth turns positive for the final quarter (October data may continue to show weakness but a pick-up in November and December should not be ruled out).

The forecast for for 2020 was more uncertain. Three possible scenarios for the outlook were presented and executives were invited to vote on the one that best represented their expectation for 2020. Results of the poll are summarized in the chart above.

#TIACA #aircargo #aviation #Outlook #2020outlook #forecast #economics