December 11, 2019

Air cargo sector could see rise in volume in 2020, but freight revenue continues to drop.

Overall industry will remain profitable overall, thanks to rebound in passenger business, IATA says.

By DC Velocity Staff

The battered air cargo sector could post a modest improvement in volume in 2020, following months of dismal statistics caused by international trade wars, a broad deterioration in global trade, and a worldwide slowing in economic growth, industry group The International Air Transport Association (IATA) said today.

Most recently, Geneva, Switzerland-based IATA found that the global air freight volumes had tumbled in October to their 12th consecutive month of year-on-year declines. Overall, cargo traffic turned negative last year for the first time since 2012, registering a 3.3% annual decline in demand, its steepest drop since 2009 during the Global Financial Crisis, the group said.

Looking ahead, cargo traffic is expected to rebound moderately with 2.0% growth in 2020, although its predicted freight carriage total of 62.4 million tons would still be below the 2018 total of 63.3 million tons. Likewise, cargo revenues will slip for a third year in 2020, with revenues expected to total $101.2 billion, down 1.1% from 2019, IATA forecast.

However, airlines will see a brighter picture when they factor in the passenger sector, marking the industry's 11th consecutive year in the black, IATA said. The global airline industry will produce a net profit of $29.3 billion in 2020, improved over a net profit of $25.9 billion expected in 2019 (revised downward from a $28 billion forecast in June), the group said.

"Slowing economic growth, trade wars, geopolitical tensions and social unrest, plus continuing uncertainty over Brexit all came together to create a tougher than anticipated business environment for airlines," Alexandre de Juniac, IATA's director general and CEO, said in a release. "Yet the industry managed to achieve a decade in the black, as restructuring and cost-cutting continued to pay dividends. It appears that 2019 will be the bottom of the current economic cycle and the forecast for 2020 is somewhat brighter. The big question for 2020 is how capacity will develop, particularly when, as expected,  the grounded 737 MAX aircraft return to service and delayed deliveries arrive."

The industry's overall operating expenses are projected to climb 3.5% to $823 billion in 2020, from $796 billion in 2019. But that will be offset by a larger rise in passenger numbers, which are expected to reach 4.72 billion in 2020, up 4.0% from 4.54 billion in 2019. Adding more passengers is the secret to airlines' success, since the average net profit per departing passenger is predicted to be $6.20, up from $5.70 in 2019.

2019 proved to be a difficult year for economic forecasters, since global gross domestic product (GDP) growth was just 2.5% (versus 2.7% as forecast by IATA in June) and world trade growth was only 0.9% (down from 2.5% forecast in June).

IATA's latest forecast would reverse that trend, predicting that global GDP will expand by 2.7% in 2020 and world trade growth will rebound to 3.3%, pushed by U.S. election year pressures to reduce trade tensions and to actions by central banks to ease fiscal policy and support growth, IATA said.

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