Industry Pulse: Air freight growth nearly doubled in 2016

Dive Brief:

Air freight tonne kilometers (AFTKs) grew 3.6% in 2016, which according to IATA is almost double the average five-year pace at 2%. As fuel prices dropped, fuel costs contributed only 19% of airline costs in 2016.
IATA reported that the industry facilitated 67.7 billion supply chain jobs and produced $3.0 trillion in "value-added output globally" in 2016. Post-tax profits declined slightly to $34.8 billion from $35.9 billion in 2015, but the operating margin jumped 0.3%.
The report also noted that the aviation industry — both passenger and air freight — is "shifting eastward" as aviation growth in Asia continues to climb.

IATA Airline Revenues 2013 to 2017 — IATA

Dive Insight:

IATA noted that 2016 saw faster air cargo delivery, which makes sense since the industry ferries more than a third (35%) of global trade. Even though air cargo picked up in 2016, IATA's data reveals that the industry's revenues decreased by $5 billion, suggesting that while shippers may be utilizing air freight, prices are dropping and airlines aren't making as much as they previously did.

To combat falling revenues but take advantage of increasing traffic, IATA said the industry plans to focus on carrying the cargo it carries best, such as microelectronics, pharmaceuticals and medical devices. Perhaps by specializing in certain types of cargo, the air freight industry can capitalize on the increase in traffic and improve profitability.

E-commerce is still regarded to be a big driver of freight growth, which may be why more shippers are using airlines to carry cargo, but 90% of cargo is still ferried by ocean shipping, and ocean shipping is still more cost effective for many shippers. In order to compete, air freight will need to continue streamlining its operations by implementing new tech, consolidating routes and utilizing valuable relationships with freight forwarders.

The opportunity is there — the numbers clearly show that shippers are increasingly relying on air freight — but the industry still needs to find the most efficient way to profit from it as capacity pressure grows.