the air cargo outlook: trends, opportunities and threats
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The Air Cargo outlook: trends, opportunities and threats. Michael Vorwerk – President CNS April 2011 Health and Personal Care Logistics Conference / Spring 2011 www.iata.org/economics. IATA Introduction. - PowerPoint PPT PresentationTRANSCRIPT
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To represent, lead and serve the airline industry
The Air Cargo outlook: trends, opportunities and threats
Michael Vorwerk – President CNSApril 2011Health and Personal Care Logistics Conference / Spring 2011www.iata.org/economics
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IATA Introduction
Founded in 1945, the International Air Transport Association (IATA) is the industry’s global trade association
With 225 members in more than 130 countries, IATA represents 93% of international scheduled traffic
IATA’s mission is to represent, lead and serve the air transport industry
IATA delivers standards and solutions to ensure successful air transportation
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Introduction
Cargo Network Services Corp. Established in 1985 to support the Air Cargo
Industry in the USA Located in Miami Key Services
CASS USA & e-billingAgent Endorsement ProgramGlobal Cargo Agenda Implementation Industry Statistics Information & Distribution servicesPartnership Conference
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Introduction continued
I
A m
N ot
A n
E conomist
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I’d rather talk about ….Did you know? Every fifth drug is temperature-sensitive
20% of the world’s best selling pharmaceuticals are temperature sensitive
$ 130 billion of the total pharmaceutical market ( about $ 650 billion ) is represented by temperature sensitive products
The share of temperature-sensitive products will rise the next years
Biological’s + 15 %Chemical based+ 10%
Nearly 100 % of all vaccines and 68 % of all products sold by biotech companies need to be stored and transported between 2 to 8 ºC
43 % of all diagnostics and about 11 % of all products from large pharmaceutical companies have to be handled with the same precautions
There is a correlation between product price and temperature-sensitivityand that some biological’s, vaccines and hormones can reach a package price of up to $ 6000.- or you can fill a LD3 Container with up to $ 20 million of product value.
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Industry Overview
“Prediction is very difficult, especially about the future”Niels Bohr
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Squeeze on cargo profits started late 2010
Source: US BTS
Profitability of US Cargo Only AirlinesSource: US BTS
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
% o
f R
even
ues
Operating Profit Margin
Net Profit Margin
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Heads of cargo confidence losing altitude
Source: IATA
IATA survey of heads of cargoSource: IATA Survey
0102030405060708090
100M
ar
20
06
Se
p 2
00
6
Ap
r 2
00
7
Oct
20
07
Ap
r 2
00
8
Oct
20
08
Ap
r 2
00
9
Oct
20
09
Ap
r 2
01
0
Oct
20
10
We
igh
ted
Sco
re
Volumes - next 12 months
Yields - next 12 months
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Travel markets strong trend but cargo?
Source: IATA
International air freight and passenger volumesseasonally adjusted
160
180
200
220
240
260
2005 2006 2007 2008 2009 2010 2011
RP
K, b
illio
ns
9
10
11
12
13
14
FT
K,
bill
ion
s
RPK
FTK
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Coincident indicators have slowed sharply
Source: IATA, SIA
Semi-Conductor Shipments and Air FreightSource: IATA, SIA
-34
-26
-18
-10
-2
6
14
22
30
38
46
54
% G
row
th,
Se
mi-
Co
nd
uct
or
Sh
ipm
en
ts
-26-22-18-14-10-6-2261014182226303438
% g
row
th -
In
tern
atio
na
l FT
Ks
International FTKs
Semi-Conductor Shipments
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Boost from business restocking is over
Source: IATA, Haver
Total Business inventories to sales ratio and FTKsSource: US Census Bureau and IATA
0.8
1
1.2
1.4
1.6
Inv
en
tori
es
to
sa
les
ra
tio
8
9
10
11
12
13
14
15
16
17
18
FT
Ks
(b
illi
on
)
Inventories to sales ratio
FTKs
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World trade rising rapidly once more
Source: IATA, Netherlands CPB
World trade in goods and air FTKsSource: Netherlands CPB and IATA
8
9
10
11
12
13
14
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Bill
ion
FT
Ks
90
100
110
120
130
140
150
160
170
inde
x of
wor
ld t
rade
, 20
00=
100
International FTKs(left scale)
World goods trade volumes(right scale)
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Business is spending on capital goods
Source: Haver
Capital spending intentionsSource: Haver Analytics
-70
-50
-30
-10
10
30
50
70
Q1-2004 Q1-2005 Q1-2006 Q1-2007 Q1-2008 Q1-2009 Q1-2010 Q1-2011
Ne
t ba
lanc
e in
tend
ing
to in
cre
ase
in
vest
me
nt
-15
-10
-5
0
5
10
15
Ne
t ba
lanc
e in
tend
ing
to in
cre
ase
in
vest
me
nt
UK business(left scale)
Japan business(right scale)
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Mixed picture for the consumer
Source: Haver
Consumer confidenceSource: Haver Analytics
0
20
40
60
80
100
120
Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11
Ba
lan
ce e
xpe
ctin
g im
pro
vem
en
t, in
de
x
-35
-30
-25
-20
-15
-10
-5
0
Ba
lan
ce e
xpe
cte
ting
imp
rove
me
nt,
ne
t %
China
Europe(right scale)
US
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Leading indicators very positive
Source: IATA, JP Morgan/Markit
Purchasing Managers confidence survey and Air Freight DemandSource: IATA, JP Morgan
35
40
45
50
55
60
65
70
PM
I V
alu
e (5
0 =
No
-Cha
ng
e)
-26-22-18-14-10-6-2261014182226303438
% G
row
th, I
nte
rnat
ion
al F
TK
s
International FTKs
JP Morgan Output PMI (+ 2 months)
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Business travel market remains strong
Source: IATA
Premium travel growth and business confidence
-30
-25
-20
-15
-10
-5
0
5
10
15
20
2006 2007 2008 2009 2010
% c
hang
e ov
er y
ear
30
35
40
45
50
55
60
65
Con
fiden
ce in
dex
Business confidence
Premium travel growth
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Europe’s economic situation remains grim
Source: Haver
10-year government bond yields, %
0
2
4
6
8
10
12
14
97 98 99 00 01 02 03 04 05 06 07 08 09 10
Greece
USUKItalySpain
PortugalIreland
Germany
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But optimism over ‘emerging’ markets
Source: EIU
Forecasts for GDP growth Source: EIU
0
1
2
3
4
5
6
7
8
9
US Japan Europe ASPAC exclJapan
Middle EastNorth Africa
LatinAmerica
World
% c
ha
ng
e o
ver
yea
r
2010 2011
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Rising oil price is the major threat this year
Source: Platts, Bloomberg
Jet Fuel and Crude Oil Price ($/barrel)
20
40
60
80
100
120
140
160
180
200
Jan03 Jan04 Jan05 Jan06 Jan07 Jan08 Jan09 Jan10 Jan11
Jet fuel price
Crude oil price (Brent)
Futures curve
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Fuel prices will squeeze airline profitability
Source: IATA
Global commercial airline profitability
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.019
95
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
E
2011
F
% r
even
ues
-20
-15
-10
-5
0
5
10
15
20
US
$ bi
llion
Net post-tax losses(right scale)
EBIT margin(left scale)
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Despite Economic DevelopmentAirfreight always has a future
Ongoing Airfreight DriversWage Disparity: Low value work moving to low cost production areas
Maturing Markets: As emerging economies mature consumers demand more imported goods
Special Products: Live Animals, Perishables, Pharmaceuticals, & Valuables = Airfreight
Emergency Shipments: Rapid recovery from breakdown or crisis situations
Speed to Market: Protecting innovation from competitors
Capital Costs: Reducing inventory costs in the supply chain through faster delivery
Just In Time: Reducing inventory volumes & costs by destocking the supply chain
Current Airfreight Suppressors
Diversion to other modes: Shift of lower value items to sea / road / rail freight
Demand for low cost products: Consumer demand shifting to low cost products to preserve purchasing power
Further structural change: Only likely to occur if economical and/or regulatory environment will considerably
Automotive, 9%
Pharmaceuticals, 8%
Valuables, 2%Live Animals, 1%
Perishables, 1%Fashion Goods, 2%
Consumer Goods, 5%
High Tech., 12%
Capital Goods, 16%
Raw materials, 18%
Machinery, 26%
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Source: Adapted from The Economist
This sums it up
REGULATORY
CONSTRAINTS
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Thank-you
Any Questions?