International Freight Forwarder Association

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Air cargo survey predicts stabilization, consolidation

Tuesday, March 23, 2010

VANCOUVER, 23 March 2010 – International consulting firm Oliver Wyman, with support from the International Air Transport Association (IATA), announced the findings of its 2010 Global Air Cargo CEO Survey at the IATA World Cargo Symposium in Vancouver. This year's survey of more than 30 CEOs of top global air cargo players found that, while the global economy may be showing signs of stabilization, the recovery in the air cargo market is still fragile. Survey highlights include:

  • Air cargo firms are cautious about projected improvements in 2010, but almost all foresee a return to 2007 peak levels within 1-3 years.
  • The majority of growth is expected to come from China and North Asia, followed by the rest of Asia-Pacific. Accordingly, air cargo providers plan to focus sales attention in these regions.
  • Despite the projected recovery, customer buying preferences and patterns have experienced a permanent shift. Customers will continue to be highly price-sensitive and will keenly evaluate alternative transport modes to meet their shipping needs for segments with slower supply chain requirements.
  • Temperature-controlled and pharmaceutical shipping are widely expected to lead the recovery in terms of growth rates; however, yields for this segment will inevitably come down, too, unless carriers can clearly differentiate their offering and forge closely integrated relationships with customers around these products.
  • The most immediate CEO investment priority is e-freight; others include security improvements, cold chain capabilities, and lightweight containers.

"As the industry slowly emerges from the worst-ever demand crisis, key lessons learned are that faster response, added financial flexibility, more conservative capacity planning, and diversification of risk across markets and products are key elements to successfully manage in a downturn," says Niko Herrmann, a Partner at Oliver Wyman. "Carriers in the future will require financial and network strength as well as enhanced organizational and management capabilities to get the best out of their cargo capacity."

The survey also found that continued economic and competitive pressures may drive increased consolidation of the sector.

  • More than half of the CEOs expect significant M&A activity in the air cargo industry in the near term.
  • Many are actively evaluating alliances and joint ventures, i.e., "testing the waters."

Herrmann adds: "The CEOs are signaling that, in the future there will be less room for smaller carriers, especially in the all-freighter segment. Few expect that more belly carriers will enter into the freighter business – and even for dedicated niche players, the scope is believed to be limited as cyclical volatility poses a high risk. Comprehensive product and service offerings from large global players will be required to meet customer needs and fend off the continued commoditization."