Airfreight industry treads unknown territory due to virus impact on economy

After a very difficult year that saw trade tensions heightening between China and the United States, the global air cargo industry entered another challenging year 2020 that is already seeing restrictions due to the spread of coronavirus.
The air cargo industry is bracing itself for the impact of measures taken to halt the spread of the deadly coronavirus in China.
Many international airlines have already halted flights to and from China due to the spread of coronavirus, which has already taken the lives of hundreds of people in Asia.
In the world’s second largest economy — China, freight forwarders are badly affected as truckers, warehouse staff, cargo handlers and manufacturing staff would not be able to return to work for longer than expected.
Industry experts say the most significant direct effects will be felt on the air transport market, especially belly-freight services on passenger flights.
Freight forwarders have already warned that the closure of their offices in China will be extended in line with the extended New Year holiday. This means the air freight disruptions will continue for a foreseeable future in one of the key markets for the global air freight industry.
The Wuhan coronavirus has killed more than 1,000 people globally since the outbreak began in China’s Hubei Province, according to authorities. More than 40,000 have been infected and there were worrying signs of new outbreak clusters in Hong Kong and Japan.
As of Wednesday morning, the number of deaths from the virus stood at 492, an increase of 67 from the previous day, including a second death outside of mainland China, CNN reported.
Wuhan is a significant hub for road and air transport, but more so for rail and river transport.
According to the Civil Aviation Administration of China (CAAC), Wuhan Tianhe Airport was the country’s 16th most busy in terms of cargo, handling 221,576 tonnes.
The city has a large industrial zone where high tech, automotive and pharma products are made, amongst others.
The outbreak of the virus in Wuhan, a city that is home to 11mn people, prompted the Chinese government to effectively quarantine the metropolis and much of the surrounding Hubei province, barring people from moving around.
Latest data indicate that 2019 was the worst year for air freight demand in 10 years. Obviously, the US-China trade war has had many negative impacts on air freight industry.
Air cargo’s performance in 2019 was dampened by weak growth in global trade of just 0.9%, according to the International Air Transport Association. The sector’s underperformance was also due in particular to slowing GDP growth in manufacturing-intensive economies.
Softer business and consumer confidence, along with falling export orders, also contributed to air freight struggles.
Data for 2019 global air freight markets provided by IATA showed that demand, measured in freight tonne kilometres (FTKs), fell by 3.3% compared to 2018 while capacity (AFTK) rose by 2.1%. This was the first year of declining freight volumes since 2012, and the weakest performance since the global financial crisis in 2009 (when air freight markets contracted by 9.7%).
Overall, the e-commerce market seems to be growing at a steady pace. However, transportation of goods by air continues to face some hefty headwinds as the US-China trade war continues to hamper demand.
All markets except Africa suffered volume declines in 2019. Asia-Pacific retained the largest share of freight tonne kilometres (FTKs), at 34.6%.
The share of freight traffic increased modestly for both North America and Europe, to 24.2% and 23.7%, respectively.
Middle East carriers’ traffic share held steady at 13%. Africa and Latin America saw their shares lift marginally, to 1.8% and 2.8%.
“Trade tensions are at the root of the worst year for air cargo since the end of the Global Financial Crisis in 2009. While these are easing, there is little relief in that good news as we are in unknown territory with respect to the eventual impact of the coronavirus on the global economy.
“With all the restrictions being put in place, it will certainly be a drag on economic growth. And, for sure, 2020 will be another challenging year for the air cargo business,” points out Alexandre de Juniac, IATA’s director general and CEO.
It is still unclear how long the coronavirus outbreak will last, how far it will spread, or how many lives it will claim.
Experts say it is impossible to calculate the extent to which it will disrupt Chinese as well as the global economy.
But China’s formidable stature in the world economy means that the impact of the current outbreak is likely to substantially exceed that of Sars in 2002 and 2003. China today accounts for about one-third of global economic growth.

* Pratap John is Business Editor at Gulf Times.