Over the past 20 years, the air cargo industry as a whole, and the air express sector in particular, has helped to change the way the world does business – we have shrunk the globe and helped to internationalisesupply chains.
Today, business is moving faster than ever: Value is being created in services; products are getting lighter and smaller, and supply chains are growing longer and more complicated. All these trends favour continued growth in air express services.
Underpinning all of this is the need for speed. Companies simply can’t afford to wait weeks for components and finished goods. New products and technologies are constantly coming on to the market, and with customers who want the latest and best products, obsolescence rates are high.
The increasingly smaller size and lower weight of high-value products will continue to create demand for an air express supply chain. Since the widespread adoption of aircraft as cargo carriers, air freight traffic has grown at about twice the rate of global GDP.
According to IATA, for instance, the amount of international air freight traffic carried by its 33 member carriers grew by 2.7 per cent in 2007 to 37,446 million freight tonne kilometers. Since World War II, global trade has consistently grown faster than world GDP. More firms are part of global supply chains than ever before, and countries want to make sure that they have a link in the chain. The proliferation of free trade agreements and talks between ASEAN countries and their larger neighbors demonstrates a commitment to breaking down trade barriers.
Where does this lead?
First, air cargo will continue to grow. According to industry estimates, world air cargo is expected to grow at an average annual rate of more than 6 per cent over the next 20 years, and overall traffic is forecast to triple.
The number of freighters flying the skies by that time is expected to be in excess of 3,900 – up from more than 1,900 at present. In fact, from the beginning of last year estimates place outstanding orders at some 250 large-size freighter aircraft.
Second, air express will continue to be the air cargo sector with the highest growth. Express has grown at more than twice the rate of total worldwide air cargo traffic, averaging more than 16 per cent annually in the last decade.
In fact, according to the Air Cargo Management Group, the volume of goods shipped by air express increased more than four times between 1992 and 2006 – from 540,000 shipments a day to over 2.26 million shipments a day.
Third, over the next few decades global express supply chains should broaden, and focus on more than just the major economies. In the past, cargo flows have mainly been intra-Europe, US-Europe, US-Japan and, to a lesser extent, Japan- Europe.
High-growth areas in the future will be markets connected with Asia, including the Europe-Asia, trans-Pacifi c and intra- Asia sectors. Air freight traffic flows from Asia may be the fastest growing in the world. With a value of US$34 billion, the Asia-Pacifi c region is the fastest-growThexpress and parcels delivery area.
China & India growth drivers
Over the past few years, the region has experienced growth rates of 15-20 per cent. With an average growth rate of 20 per cent a year, it has been estimated that mainland China will become the sixth-largest express market in the world by 2010.
By 2023, traffic from China to North America and from Asia to North America will have surpassed today’s second-largest freight market of Europe to North America.
Companies are actively investing in this future scenario. For example, the new FedEx hub serving the entire Asia-Pacifi c region will open in Guangzhou in China in December this year.
The growth story of air cargo in the next few decades isn’t just about China. India is also poised for solid growth. A report by the Economist Intelligence Unit predicts that by 2020 the importance of these two Asian giants in the global scheme of things will be three-fold what it is now, while they in turn will act as locomotives to drive trade and investment in other Asian nations such as Vietnam and Indonesia.
Recent market openings have brought tremendous benefits to the people of the world, and nations must continue to liberalise in order to grow in an increasingly globalised economic system.
Infrastructure challenges
Long-term planning for infrastructure is crucial to sustained growth. Th is includes both the “soft” infrastructure of deregulation and the “hard” infrastructure of airports, highways, ports, roadsand bridges.
Hong Kong’s magnificent airport, which was quite controversial at the time it was being planned and built, is an excellent example of building world-class infrastructure for the future. Mainland China is now grasping the importance of infrastructure and is rapidly building new highways, airports and other facilities, but some parts of Asia are lagging behind. India still needs massive investment in infrastructure to achieve the long-term growth rates it wants and needs.
These are not insurmountable challenges. But while they exist, we at FedEx will continue to work to overcome these hurdles and deliver goods to world markets in the fastest, most efficient way.