Commentary: Same old story for air cargo in 2017?

While air cargo is still in a fragile state, no matter what happens to the health of the industry, new regulations and challenges will abound in 2017, said Jon Ross, a former American Shipper editor who is an expert on the air cargo industry.    The year in air cargo already seems like it will be dominated by that most ever-present of online retailers, Amazon. With the new year only a few days old, news outlets were beginning to report that the retailer was no longer happy with the cargo capacity at the hub for its Prime Air fleet and had begun lobbying for a second runway.
   The Clinton County Port Authority, which operates the Wilmington Air Park in Ohio, has reportedly asked the federal government to shoulder some of the financial burden of expanding the airport.
   The airport actually already has a second runway, but it has fallen into disrepair. The extra landing strip was used by DHL when Wilmington served as one of its U.S. bases of operation, but the runway hasn’t been in use since the parcel carrier left town.
   In addition, Air Transport Services Group (ATSG), which consummated a deal back in March with Amazon that allowed the retailer to lease 20 Boeing 767s that would be operated by ATSG, recently acquired a maintenance and repair company to help keep its Amazon fleet up to snuff. The March deal also included Amazon buying a 10 percent stake in ATSG.
   Amazon’s growing air cargo presence is definitely a story to watch in 2017, but for the rest of the air cargo industry it seems the status quo of slow growth, interrupted by months of relative stagnation, will remain.
   The most recent numbers from the International Air Transport Association (IATA) don’t exactly inspire confidence in a rejuvenated air cargo industry. In November, total worldwide airfreight activity rose 6.8 percent year-over-year, but this represented a nearly 2 percent contraction when compared to October 2016. Global capacity only ticked up 4.4 percent in November compared with the previous year.
   Despite the general sluggishness of growth in the industry, the November numbers did seem to inspire IATA Director General and CEO Alexandre de Juniac.
   “There are encouraging signs that this growth will continue into 2017, particularly with the shipment of high-value consumer electronics and their component parts. But, the trend in world trade is still stagnant. So it remains critically important for the air cargo industry to continue to improve its value offering by implementing modern customer-centric processes,” he said in a statement.
   And IATA did find that the North American airfreight industry has continued to show signs of good health. The association attributed this to an increase in European imports and a strong U.S. dollar. Conversely, this strong dollar is hurting exports.
   “Following the boost to traffic seen in 2015 from U.S. West Coast seaport disruption and airbag recalls, freight volumes on the transpacific market have fallen by nearly 3 percent so far this year to date,” IATA explained. “But there are also signs of recovery on this market, with year-on-year traffic growth accelerating to 6.8 percent in October, driven by increased U.S. trade by air with China and Japan.”
   As usual, domestic airlines have seen mixed results from their cargo operations in 2016. Delta’s latest cargo numbers seem an unpromising end to 2016. The airline reported a 3.5 percent decline in cargo ton miles in December when compared to the prior year. For the year as a whole, Delta saw a 9.7 percent decline in ton miles compared to 2015.
   At American Airlines, cargo ton miles rose 12.5 percent year-over-year in December, a strong end to a 2016 that saw cargo ton miles rise 4.7 percent over the previous year. The carrier recently announced it will boost cargo capacity between Philadelphia and San Juan, Puerto Rico, starting in April. American has a 25,000-square-foot pharmaceutical facility in Philadelphia.
   In disseminating the news, American’s Linda Dreffein said the additional capacity will “hugely benefit us in our ongoing efforts to enhance and evolve our already world class cold-chain program.”
   United Cargo experienced a 15.5 percent boost in revenue ton miles in December and a 7.3 percent increase for the year over its 2015 totals.
   Domestic integrators also appear to be doing well.
   During the second quarter of its fiscal year 2017, which ended Nov. 30, FedEx saw operating income from its Express unit rise 2 percent from the prior year period. The company said export revenue per package increased 1 percent year-over-year, and higher domestic package volume and base rates pushed up revenue as well.
   While air cargo is still in a fragile state, no matter what happens with the health of the industry, new regulations and other challenges will abound in 2017. The relatively new head of IATA, and the incoming boss at The International Air Cargo Association (TIACA), Vladimir Zubkov, will be in the middle of these changes, fighting for the vibrancy of air cargo amidst a changing international picture. With political at- tacks on globalization and an uncertain domestic policy for 2017, the prospects for the industry in the coming year are truly up in the air.