Summary
Rising jet fuel prices and distress in the financial sector dampened world air cargo growth in 2007 and 2008. However, over the next 20 years, world air cargo traffic will triple compared to current levels, and the number of airplanes in the freighter fleet will double.
In 2007, world air cargo traffic grew 5.1 percent, following 3.2 percent growth in 2006 and 1.7 percent growth in 2005. World air cargo traffic expansion in 2007 was largely driven by strong growth in the Europe-Asia, Europe-North America and Latin America-North America markets. A major contributor to the slowdown for the past three years has been the high cost of jet fuel. The year-end spot jet fuel price increased 36 percent in 2005, 10 percent in 2006, and 39 percent in 2007. The higher price of fuel diverted some traffic that otherwise would have moved by air to less expensive road transport and containership modes.
Spot jet fuel price rises accelerated markedly during the first half of 2008, reaching an all-time high of $4.27 per gallon in early July. World air cargo traffic is estimated to have grown about 1.0 percent for the first six months of 2008, compared to the same period in 2007. However, rising fuel costs, coupled with slowing economic growth in North America and Europe, turned world monthly growth in air cargo traffic negative in May and June 2008. Despite a decline in jet fuel prices of nearly 30 percent during the third quarter of 2008, world air cargo traffic levels continued to fall as economic and financial uncertainty worsened during the same time frame.
Economic activity, as measured by world GDP, remains the primary driver for air cargo traffic growth. World GDP grew 3.7 percent in 2007, following 3.9 percent growth in 2006. In the near term, the world economic outlook is increasingly gloomy as financial markets continue to suffer from a global liquidity crisis and loan defaults. A sustained recovery in economic activity is not expected before 2010.
World air cargo traffic will expand at an average annual rate of 5.8 percent for the next two decades, tripling current traffic levels. Asia's air cargo markets will continue to lead the world air cargo industry in average annual growth rates, with the intra-Asia market expanding at 8.1 percent per year. In general, markets connecting developing economies to established economies will either approximate or exceed the average world growth rate.
In response to the ongoing rise in jet fuel prices, freighter operators have accelerated fleet renewal activities, most notably in the large widebody sector. The drive to lower overall unit costs has helped increase the widebody freighter fleet from fewer than 250 in 1994 to over 1,000 at the end of 2007. Over the next 20 years, the number of airplanes in the freighter fleet is forecast to nearly double, from 1,948 airplanes in 2007 to 3,892 airplanes in 2027. Medium widebody and large freighter aircraft will lead fleet additions, growing from an overall share of 61 percent to 65 percent as traffic continues to build on long-haul, international trade lanes.