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Demand for air cargo surges as adoption of E-commerce expands rapidly

SDI Logistics Co.,Ltd | Updated: Jan 12, 2018

AIR cargo demand outstripped supply by six percentage points for all four quarters of 2017 on the back of e-commerce volumes growth, strengthening economies and inventory restocking.

As a result, airlines returned to freight profitability not seen in seven years. According to The International Air Cargo Association (TIACA) chairman Sebastiaan Scholte, airline load factors rose pushing up air cargo revenue by 15 per cent in 2017 compared with 2016. Revenue is expected to rise by nine per cent in 2018.

"China-Europe rates will stay high. Even where there is some flexibility, rates will stay in the US$7 to $10/kilogramme band for several more weeks yet. The current backlog probably won't fully clear before the lead up to the Chinese New Year close down starts," Freightos WebCargo CEO Manel Galindo was quoted as saying in a report by IHS Media.

China accounts for one-third of all global air cargo exports, so high rates will affect huge numbers of shippers sourcing products or components in the country.

It is not only high rates that are being forced on shippers. The steadily growing cargo volume, air and ocean, has come after a protracted period of weak demand, excess capacity, and deep cost cuts, leading to congestion at ports, roads, and airports, delaying shipments and adding to costs.

Shippers routing cargo through airports in Asia and Europe faced lengthy delays throughout the peak season as rising volume overpowered ground handlers and fast growing leisure travel quickly used up available airport slots, forcing some freighters to shift to secondary hubs. Amsterdam Schiphol was the worst affected airport in Europe.

The pressure on Frankfurt and other hubs in Europe is not expected to dissipate. The International Air Transport Association (IATA) has predicted that rapidly rising passenger and cargo demand could see hundreds of airports reaching capacity in the next 10 years, with most of the Europe gateways among these.

IATA also expects air cargo volume in 2017 to be nine per cent higher than 2016, and there has not been the freighter or belly capacity available on major routes to handle the demand. 

For the next few months cross border e-commerce is expected to continue pushing demand ahead of supply, with China leading the way. CEO of logistics provider U-Freight Group Simon Wong said the exponential growth of e-commerce was behind new trade patterns, such as the growth in direct business-to-customer (B2C) and even consumer-to-consumer transactions.

The World Customs Organization's (WCO) Policy Commission adopted the Luxor Resolution in December that outlines the guiding principles for cross-border e-commerce. It is aimed at helping customs and other government agencies to understand, coordinate, and better respond to the current and emerging challenges.

The WCO said e-commerce has become a game changer in the international trade arena. "One may argue that it is just another form of trade but we need to keep pace with the changes it brings to the trade environment and provide innovative solutions to deal with them," the organisation noted. 

"Efficiency of clearance and delivery of low value and small parcels is especially crucial. To manage e-commerce transactions, customs administrations need to engage with all relevant stakeholders with a view to collectively defining the appropriate approach to adopt both from a trade facilitation and enforcement perspective," added WCO.