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Shipping & Logistics

Weakening global trade seen dampening air freight growth

Weakening global trade, fears of rising protectionism and declining consumer confidence is expected to dampen air freight growth this year, according to the International Air Transport Association (IATA).

In its 2018 full year results released this month, IATA showed that in December air cargo demand decreased by 0.5 per cent and was recorded as the worst performance since March 2016.

The report further shows order books of all major exporting nations, with the exception of the US, contracted in the second half of 2018.

Is this trend that IATA expects to spill into this year.

“Air cargo demand lost momentum towards the end of 2018 in the face of weakening global trade, sagging consumer confidence and geopolitical headwinds. Still, demand grew by 3.5 percent compared to 2017. We are cautiously optimistic that demand will grow in the region of 3.7 percent in 2019,” said Alexandre de Juniac, IATA’s Director General and CEO.

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"But with the persistence of trade tensions and protectionist actions by some governments there is significant downside risk. Keeping borders open to people and to trade is critical.”

Last year's overall global air freight of 3.5 per cent was significantly lower than the 2017 growth of 9.7 per cent.

African carriers’ saw freight demand decrease by 2.2 percent in December 2018, compared to the same month in 2017. This was significantly less than the 9.4 percent decrease the previous month, with capacity increasing by 4.9 percent year-on-year. However, annual growth in freight demand among Africa carriers in 2018 decreased by 1.3 percent while capacity grew by 1 percent.

E-commerce performed well in the period under review although the sector still had a number of downsides.

“International e-commerce rose positively in 2018 yet there was a decline of several key demand drivers...,” reported IATA.

The high season of e-commerce is reported to be from October to May, influenced by holidays when discounts and special deals especially of electronic products are on offer.

This is also the period in which freight airlines operating in Kenya report doubling of flights in order to accommodate the rise in horticulture demand.

However, last year consumer confidence was negatively affected by Brexit concerns and trade protectionism which are predicted to affect performance this year.

In order to counter this and uplift air cargo demand, freight companies are exploring new market segments such as pharmaceuticals. A case study on pharmaceutical air cargo by Emirates in October 2018 found that airports are increasingly investing in local infrastructure, enabling them to be effective players in the pharmaceutical air cargo logistics market.

The cargo hubs include temperature-controlled storage capabilities, as well as reliable processing and handling of products to ensure pharmaceutical shipments are maintained within the required temperature.

Countries such as Singapore have already attracted investment from pharmaceutical companies with its market set to reach $1.2 billion by 2021. This is partially attributed to the county’s investment in cold chain facilities and processes.

Changi Airport Group, which operates Singapore’s major passenger and cargo airport reports that 15,500 tonnes of pharmaceutical cargo passed through the airport in the first eight months of 2017 alone.

Kenya increased its storage facilities last year with the construction of five new transit sheds at the Jomo Kenyatta International Airport (JKIA) that are able to handle perishable goods. The cargo handling capacity is set to be increased by more than 10 per cent, taking its number of transit sheds to six.

While it is horticulture products that Kenya exporters majorly deal in, the increased cold storage facilities could open a new market opportunity.

“To appeal to investors and attract demand in new market sectors, the air cargo industry should improve its offerings. Facilitating modern processes with technology and digital devices will help build a stronger foothold in e-commerce and the transport of time- and temperature-sensitive goods such as pharmaceuticals and perishables,” said de Juniac.

- African Laughter.

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