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Why should Middle East be upbeat about air cargo market?

In order to meet the customers’ increasing expectations and demands, Middle East companies are shipping more stuff, ranging from smart-phones and luxury cars, via air. In fact cargo planes are now transporting stuff that was traditionally carried through only road and sea routes. This has led to a steady rise in freight volumes emerging from the Middle East region.

Besides, because of the booming e-commerce and a steady rise in the number of online shoppers, air freight industry has clocked a good run in the past few months. This trend is expected to continue in the region as e-commerce industry is expected to grow significantly in the coming months. According to an online regional payment platform PayFort, Middle East e-commerce sector is poised to cross the mark of $69 billion by 2020.

Good run

Middle Eastern carriers have posted the second fastest year-on-year growth in freight volumes in April 2018, up 7.3 percent, according to the recently released data for global air freight markets by the International Air Transport Association (IATA). This was a significant acceleration in demand over the 0.8 percent recorded the previous month (March). The increase mainly reflects developments from a year ago rather than a substantive change in the near-term trend.

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However, seasonally-adjusted freight volumes continue to track broadly sideways. This is consistent with signs of a broader moderation in global trade as the capacity increased by 4.8 percent.

“April saw a strengthening from the abrupt slowdown in growth experienced in March. This is good news. We remain cautiously optimistic that demand will grow in the region of 4 percent this year. But the forecast appears to have increasing downside potential,” said Alexandre de Juniac, IATA’s Director General and CEO.

“Oil prices continue to rise as does protectionist rhetoric. Borders open to people and to trade drive economic growth and social prosperity. We are all disadvantaged when they are closed,” said.

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Building up

Middle Eastern carriers’ freight volumes had increased 6.3 percent year-on-year in December (last year) and capacity increased by 4.7 percent. This contributed to an annual increase in demand of 8.1 percent in 2017 – the third fastest growth rate of all the regions.

However, having not seen the strong upward demand of other regions in the first half of 2017, Middle-Eastern carriers’ share of global demand dropped for the first time in 18 years.

Global demand surge

Data for global air freight markets has showed that demand, measured in freight tone kilometers (FTKs), rose 4.1 percent in April 2018, compared to the same period the year before. This was up from the 1.8 percent growth in annual demand recorded in March 2018.

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While freight capacity, measured in available freight tone kilometers (AFTKs), grew by 5.1 percent year-on-year in April 2018. This was the second time in 21 months that capacity growth outstripped demand growth.

Meanwhile, after a sharp fall in March 2018, to a 23-month low, global air freight volumes recovered slightly in April 2018. The pace at which demand is growing, however, remains significantly slower than in much of 2017.