EXTRANS GLOBAL - Air Freight News - Week 30 2024

Air Cargo General

1) The European Union is unable to prevent the growth of e-commerce from China

The European Union (EU) recently announced plans to impose tariffs on low-priced cross-border e-commerce goods from China. It is considering imposing tariffs on products valued at less than 150 euros or lowering the non-tariff value threshold.
According to the European Commission (EC), the EU imported a total of 2.3 billion items last year that were below the 150-euro non-tariff threshold. As of April this year, 350,000 items were imported duty-free, more than doubling from the same period last year.
The EU currently does not impose tariffs on imports of less than 150 euros from non-EU countries, and the UK also does not impose tariffs on imports of less than 39 pounds.
Despite the continued "China-bashing" involving political issues among the US and European countries, they have been unable to stem the surge in e-commerce demand.
In particular, air cargo import volumes are increasing at major hubs, with Liège Airport (LGG), considered the e-commerce hub of Europe, seeing a 15% year-on-year increase in cargo tonnage to 566,117 tons in the first half, along with a significant increase in cargo flight movements.
While Liège Airport is also expected to be impacted by customs crackdowns on China-origin e-commerce, its cargo handling performance has continued to rise.
Market analysts point out that even just looking at June figures, while Frankfurt Airport (FRA), Europe's largest hub, saw an 11.4% increase in cargo to 178,324 tons, LGG saw a 21% increase to 95,514 tons, indicating a difference in growth rates. Global air cargo demand grew 13% during this period.

2) The global express delivery market is expected to continue growing over the next 4 years - Ti, "Profitability decline of last-mile companies is an issue

The global express delivery market size announced recently by Ti (Transport Intelligence) is expected to reach around 660 billion euros (690 billion dollars), which is a 9.2% year-over-year growth. It is forecasted to reach around 737 billion euros by 2028.
Ti stated that "the (express) market will continue to be driven by the growth of e-commerce". Last year, the Asia-Pacific region recorded a market value of around 200 billion euros, leading the global parcel delivery market, followed by North America at 192 billion euros. Ti noted that "these two regions account for more than 75% of the global market value, increasing their dominance in the express delivery industry".
Europe ranked third with a market value of around 102 billion euros, but with a relatively low annual growth rate (CAGR) of 2.9%, indicating that it is a more mature and saturated market. Other regions like the Middle East and North Africa, South America, Sub-Saharan Africa, Russia, Caucasus and Central Asia have "relatively smaller" market shares.
While the global express delivery market is expected to continue growing over the next 4 years, the issue is that in already mature markets, last-mile delivery companies are facing difficulties in securing profitability.
For example, the UK delivery company Yodel was acquired by the tech firm Shift just before bankruptcy in February, and also acquired Tuffnells, another UK express company, last June. However, an industry insider commented that "the plan of a 'non-profitable tech' company to acquire a 10 million pound revenue company and then a 50 million pound revenue company within 6 months to become a 'logistics giant' was unrealistic from the start".
Ti explained that "the last-mile segment often struggles with profitability, but is attractive to investors due to the growth potential of internet-based retail".
For instance, the UK-based express delivery company Evri, which holds around 20% market share in the UK last-mile market, is currently on the market, with Chinese e-commerce giants JD.com and Alibaba showing strong interest in Evri.

3) Incheon Airport's SEA & AIR cargo volume surges 65%

In the last 2nd quarter, Incheon Airport's Sea & Air combined transportation volume increased by 64.2% to 31,644 tons compared to the 1st quarter.
Incheon International Airport Corporation also analyzed the transportation time from 3 major domestic ports to Incheon Airport for the first time to improve the quality of Sea & Air combined transportation. The analysis showed that the total transit time was fastest from Incheon Port, while the actual airport arrival time was fastest from Gunsan Port.
Incheon Airport's 2nd quarter e-commerce Sea & Air combined transportation volume recorded 31,644 tons, a 64.2% increase compared to 19,266 tons in the 1st quarter.
99.6% of the origin was China. The destination ports were Incheon Port (37.3%), Gunsan Port (31.8%), and Pyeongtaek Port (30.4%).
The main destinations were major developed countries such as the Americas (41.6%) and Europe (32.1%).
Incheon International Airport Corporation expects the demand for e-commerce cargo to Southeast Asia, the Middle East, and South America to increase in the second half as Chinese e-commerce companies diversify their sales markets.
The analysis of transportation time from each port was conducted by sampling the actual Sea & Air combined cargo transported from June 26 to 30, and analyzing the average customs declaration time for each section. Incheon Port, being geographically closest to Incheon Airport, had the shortest total average transit time of 4 hours and 39 minutes.
This analysis confirms that logistics companies using the Sea & Air combined transportation can build a very stable logistics model by utilizing the Incheon Airport Sea & Air combined transportation route, as the cargo arrival time at Incheon Airport is almost the same regardless of the arrival port selected in Korea.
An executive of a major logistics company utilizing Incheon Airport's Sea & Air combined transportation analyzed that Incheon Airport maintains a stable supply using international passenger and cargo flights even in rapidly changing external environments like COVID-19, further enhancing the trust of shippers.
The president of Incheon International Airport Corporation stated that the pace of change in air cargo trends is accelerating, so it is critical for the air logistics industry to quickly transition their business models. Incheon Airport aims to lead the global air cargo industry by swiftly forecasting market changes and suggesting new growth directions.

4) The demand for cargo aircraft is forecast to steadily increase until 2043

According to the Airbus report, the global GDP and trade market are converging with the GDP growth rate, and the global GDP is expected to grow at a CAGR (Compound Annual Growth Rate) of 2.6% during 2023-2043, while the global trade is expected to grow at an average annual rate of 3.1% during the same period.
As a result, global air cargo traffic is expected to grow at an average annual rate of 3.1% during 2027-2043, with express cargo and general cargo growing at 4.4% and 2.7% CAGR respectively.
Additionally, air cargo demand, which recorded 24.5 billion FTK (Freight Tonne Kilometers) in 2023, is expected to increase to 52.5 billion FTK by 2043. In 2023, express cargo accounted for 20% and general cargo 80%, but by 2043 the share is expected to shift to 25% for express cargo and 75% for general cargo.
This will impact the demand for freighter aircraft, with the global freighter aircraft fleet expected to reach 3,360 by 2043. It is estimated that 2,470 freighter aircraft will be required during 2024-2043.
In conclusion, Airbus expects the air cargo transportation market to continue growing over the next 20 years, driven by economic growth and trade expansion, with the express cargo segment experiencing rapid growth. The demand for freighter aircraft is expected to steadily increase, necessitating the introduction of new aircraft models.

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