Forecast vs. Actual: air cargo in 2019 and 2020

Policy Pulse - George Anjaparidze - 10 February 2020

We got 3 out of 4 predictions right for air cargo performance in 2019 (see table). While not perfect, it is far better than established industry forecasters.

Table: Air cargo 2019 forecast vs. actual

Source: Forecast performance is based on Veritas Global forecast, actual performance is based on IATA reporting of year end data and IHS Markit high frequency indicators.

For 2020, we expect air cargo traffic performance to grow by about 3% to 4%

On the macroeconomic front we expect to see positive lagged effects in 2020 from monetary policy easing we saw in 2019. High frequency indicators show the global economy continued to accelerate in January 2020 for the third straight month. However, trade performance has struggled to recover. Overall trade tensions are easing but trade relationships have not normalized and are unlikely to in the foreseeable future. Decisions by some central banks to pursue less loose monetary policy in early 2020, if further tightened, add downside risks to our forecast.

One-off factors and policy risks also influence our outlook. The coronavirus outbreaks have disrupted supply chains and on-net we expect this to have a favorable impact on air cargo demand. However, the sector faces unprecedented level of policy risks.

Policy issues in 2020 will have a major impact on air cargo demand this year as well as the more distant future. In addition to trade tensions, negotiations at the WTO will specifically impact air cargo performance, including negotiations on whether to extend the customs duties moratorium on international e-commerce, compliance with tariff policies of the Information Technology Agreement and implementation of the Trade Facilitation Agreement. Negative outcomes of these negotiations add downside risks to our forecast.

Furthermore, growing consumer awareness on climate change will chip away at demand, especially if industry is unable to improve perceptions and sustainability credentials of the air cargo product.

About Veritas Global: Our vision is to have a positive impact on the world through truthful advice informed by robust analysis. We are a premier provider of tailored solutions on climate change, international conflict economics and infrastructure.

#aviation #trade #outlook #aircargo #ecommerce #WTO #sustainability #climatechange #risks #logistics #economy #economics #coronavirus

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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The discussion among leaders was facilitated by Veritas Global. For inquiries, please contact us:

Tel: +41 788 606 894

Email: contact@veritasglobal.ch

About Veritas Global: Our vision is to have a positive impact on the world through truthful advice informed by robust analysis. We are a premier provider of tailored solutions on climate change, international conflict economics and infrastructure. 

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

2020 outlook: turbulence ahead for air cargo

Policy Pulse - 8 October 2019 - George Anjaparidze

Forecasters are licking their wounds after another year of missed projections. All the major crystal ball gazers got their 2019 figures wrong. Growth of 4 to 5% in FTKs will not materialize. The latest quarterly report from the International Air Transport Association indicates that, so far, industry-wide FTKs fell by about 4% in 2019 compared to the same period in 2018. While the pace of the decline in recent months has slowed, it is still too soon to be optimistic.

New export orders have fallen to their lowest levels since October 2012. Furthermore, economic policy uncertainty is at an all-time high – as measured by the frequency of phrases in press reports on monetary, fiscal and trade policy uncertainty (see Chart). If economic uncertainty deters investment, it can have disproportionately adverse impact on trade and in particular air cargo demand, since capital goods that make up investment tend to have higher import content and are also more likely to create demand for air cargo.

Given this backdrop, managing volatility and policy uncertainty can make or break a business.

At the Executive Summit of the International Air Cargo Association, George Anjaparidze, CEO of Veritas Global, will moderate a discussion on the outlook for 2020 and approaches to managing volatility. What can industry associations do to help their members manage volatility related risks? Is there a role for policy makers? What can the logistics supply chain do to respond? What tools are available?

For more information on the event check out: TIACA Executive Summit

About Veritas Global: Our vision is to have a positive impact on the world through truthful advice informed by robust analysis. We are a premier provider of tailored solutions on climate change, international conflict economics and infrastructure. 

#aircargo #economicoutlook #economics #aviation #airlines #trade #freightforwarders