News & Analysis

Boeing sees positive trend for cargo this year

Airframe manufacturer outlines industry’s need for 2,650 freighters in the next 20 years

Speaking at Cathay Pacific Cargo’s annual Cargo Business Update in April, Tom Hoang, Regional Director, Cargo Marketing at Boeing Commercial Airplanes, outlined the airframe maker’s outlook for air cargo in the coming years.

The good news is that it’s positive. Notwithstanding the softening in the air cargo market in the first quarter of 2019, Hoang sees the industry getting back on an upward curve soon. ‘The average growth in cargo since 2013 has been five per cent, up to 9.7 per cent in 2017 and then 3.5 per cent in 2018,’ he said. ‘However, it is down 3.2 per cent in 2019 up to February due to weakness in world trade that began towards the end of last year and has continued into the start of 2019.  But we believe the cargo market will rebound – not just this year, but the next five years will see a growth trend as well.’

Boeing’s forecast takes in fundamentals from GDP, global trade and industrial production, and the signs are good, led by China’s GDP and those of the emerging economies. Hoang added: ‘The fundamentals of the world economy are supporting demand. From the second half of this year, we expect to see a positive trend in all these factors – GDP, trade and industrial production. Our expectation is that over the next five years, air cargo will grow at 4.3 per cent per year, assuming world trade grows at 3.5 per cent.’

Already there are indicators that something of an upturn is taking place, with cargo throughput at Hong Kong International Airport up 0.2 per cent in March compared with the same month in 2018.

Another big factor for the air cargo business, according to Hoang, will be continued growth in e-commerce. ‘Retail sales in e-commerce have been growing at 19 per cent per year, and this is predicted to rise to 21 per cent,’ said Hoang. ‘There is growing consumer demand to get purchases quickly. Alibaba has committed to investing US$15bn in the logistics supply chain and announced plans to open six hubs around the world – Hong Kong, Hangzhou, Dubai, Kuala Lumpur, Liege, and Moscow – to meet the 72-hour global and 24-hour domestic delivery ambition. To meet that demand, air cargo will be a vital part of the e-commerce supply chain.’

This is reflected by the fleeting carried out by some of the e-commerce giants to extend their air cargo capabilities by bringing some of it in-house. Despite its scale, Hoang pointed out that ‘e-commerce is still only responsible for less than nine per cent of global retail sales, so the scope for development is enormous.’

While this is good news for the air cargo industry and for Cathay Pacific with its ideal location close to the epicentre of these developments, it’s good news for Boeing too. The manufacturer predicts that the rate of growth will stimulate the need for 2,650 freighters – new and converted – in the next 20 years, in sizes ranging from the small express parcel narrow bodies to the widebody main-deck aircraft such as Cathay Pacific’s Boeing 747-8Fs.

Currently, Hoang said, combination carriers such as Cathay Pacific with a mix of passenger and dedicated freighters are responsible for 36 per cent of the cargo revenues carried by air, behind the dedicated integrator fleets at 43 per cent. How that distribution changes with e-commerce and projected growth remains to be seen.