There are many planes in the sky that aren’t filled with passengers. There are many airlines whose sole existence is to ship cargo from one place to another. They can be seen at many airports across the world loading and unloading cargo that will eventually reach the far corners of the world. Even passenger airlines operate cargo businesses on the side, some with a dedicated fleet of cargo aircraft like Emirates, and others that use cargo hold space on passenger aircraft to transport goods.
A Decline in Global Cargo
The industry isn’t as lucrative as it once was, there has been a trending decline in cargo demand since the beginning of the year. A decline of 4.7 percent versus the previous year was measured in April, this is in contrast to an increase in freight capacity of 2.6 percent, further straining the industry.
While some markets are positive, geopolitical issues such as Brexit along with trade tensions between the U.S. and China have impacted this decline. On a global market level basis costs are increasing, and global trade is weakening. Exclusive of Africa and Latin America air cargo demand is down overall.
Air cargo is generally more expensive than other methods of shipping and it only comprises 1 percent of exports, however, the goods shipped via air account for 35 percent of global trade value.
The volume of electronics is on the decline as they continue to get smaller and much of the final assembly is done closer to customers, particularly in Asia where a growing middle class has boosted demand for electronics.
Increase in Demand for Produce
This growing middle class is creating an increase in air cargo demand for one type of cargo: fresh produce. While the volume of electronics is decreasing, fresh produce is increasing by roughly the same amount. Air cargo is the reason why consumers in the U.S. can enjoy the same produce year-round, even when it is out of season because it will likely be in season somewhere else in the world.
Strawberries can come from Egypt, pineapples from Ghana, and more. The ability for air cargo to move these extremely perishable goods from one place to another quickly is what is a key driver of this cargo growth. In some cases, it is cheaper to harvest and ship produce via air to a country than it is to grow the produce in a temperature-controlled greenhouse in the destination country.
China is a country with a growing middle class looking to spend their money. A decade ago Chinese consumers used to eat produce that was in season in China, however, with the growth of disposable incomes there is increasing demand for year-round produce availability.
For example, red cherries, popular for Chinese New Year in January and February, are out of season during that time. It’s not a problem anymore, they can just be flown in from Chile and on the shelves of Chinese supermarkets within two days of being picked halfway across the world.
Chinese per-capita disposable income has more than doubled in the past decade and it shows with an increased demand for finer goods. This is leading to an increased focus by air cargo providers to tailor offerings to better fit perishable cargo needs. There is increased use of temperature-controlled containers and a greater focus on maintaining the cold chain at airports, for example, the temperature-controlled facility American Airlines operates in Philadelphia for pharmaceuticals.
Miami International Airport even offers an ocean-to-air program that allows for perishables delivered by ship from Latin American countries to be quickly processed by U.S. Customs and Border Protection and loaded onto airplanes for quick delivery to Asian and European markets.
Overall, global shipping is on a decline but there are specific sectors of the market that are continuing to grow.
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