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World air cargo market: An overview - Views on News from Equitymaster
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  • Apr 5, 2007

    World air cargo market: An overview

    History of the air cargo industry: The size of the world air cargo market was estimated at 178,122 bn RTKS (revenue tonne kilometers) in 2005. Since 1970, the world air cargo market has grown at a CAGR of 5.1%, compared to a 3.6% CAGR growth in between 2000 and 2005. The slowdown in the past few years was mainly due to economic downturn in 2001 and events like 9/11attack, the Iraq war and SARS epidemic. The year 2004 however saw a reversal in fortunes with the industry growing at a robust 12% YoY.

    Growth determinants: The fortune of the air cargo market is primarily linked to the growth in GDP. Historically, the industry has grown at nearly 2.3 times the growth in GDP. Other forces that act as growth drivers include export promotion, new trade relationships, deregulation, open sky agreements, express logistics business growth and the emergence of JIT (just in time) concept. On the other hand, factors that impede the growth of the industry include trade quota and restrictions, oil/fuel prices, terrorist attacks, surface competition and industry relocation.

    Major markets: The top five air cargo markets (in terms of cargo handled) in 2005 were Intra U.S., China-North America, Europe-North America, Asia-North America and North America-Europe. Some of the fastest growing air cargo markets in the world are Intra China, Intra-Asia and Asia-North America. As per estimates by Boeing, these markets are expected to grow at compounded rates of 10.8%, 8.6% and 7.1% respectively between 2005 and 2025.

    Industry Prospects: The export of more time sensitive, high-value and high-tech goods has grown fastest among globally traded commodities, largely contributing to the growth of air cargo industry. According to estimates done by Boeing, the world air cargo market is estimated to grow at 6.1% between 2005 and 2025, primarily led by the growth in Asian air cargo market. The robust growth expected in the industry is likely to benefit express logistics companies as they predominantly handle air cargo. It will also benefit passenger airlines, since they get a sizeable amount of revenues (about 15%) from air cargo.

    Facts and figures have been sourced from a Boeing's presentation on 'History & Future of Air Cargo Markets'



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