Every day over $18.6 billion of goods (1/3 of all world trade) gets transported by air freight (IATA). The International Air Transport Association (IATA) have reported a 5% rise in the cost of air freight in 2017, with a further average rise of 4% predicted for 2018 (Lloyd’s Loading List). KMB Shipping’s Sea and Air Freight Director Kevin Jones looks at the reason for this increase, and the potential future impact this could have on the transportation industry.

Last August, IATA reported the demand for air freight showed a 10.4% in the first half of 2017 compared to the previous year. Compared to a growth in capacity of only 3.6% for the same period Logistics & Supply Chain, it’s clear to see why carriers are increasing prices.

REASONS FOR INCREASE

Capacity

Last year, as part of a consultation on airspace capacity for creating a third runway for Heathrow airport, the UK government revealed that all five of London’s main airports would be “completely full” by the mid-2030’s, four of them within the next ten years (Air Cargo News). In addition, Transport Secretary Chris Grayling planned to analyse the bigger picture of UK aviation and airspace issues, to asses the “long-term vision for the sector to 2050 and beyond”, due to be published by the end of 2018 (Airport Technology).

Martin Rolfe, CEO of the National Air Traffic Control Service (NATS) welcomes airspace modernisation proposals, stating “We can have them [aircraft] descend more steeply than they currently do because modern aircraft are more capable than the types of aircraft that were in service when this airspace was originally designed” (Airport Technology).

Increased cargo volumes

However, as IATA CEO Alexandre de Juniac highlights, increased cargo volumes are also a contributing factor to increased prices. He identified the increase in volumes in 2017 to be due to “a result of companies needing to restock inventories quickly to meet unexpectedly strong demand” (Lloyd’s Loading List).

KEEP CALM AND CARRY ON

As well as increased capacity and volumes, the global geopolitical and economic climate, particularly Brexit, brings further possibilities of rising fuel and transportation costs, with the potential impact of such scenarios not fully known until they occur. In the meantime however, as businesses we must continue to strive for the value-added service our customers deserve.

Kevin Jones

Kevin Jones

Sea & Air Freight Director

Kevin Jones is Sea & Air Freight Director at KMB Shipping, offering 30 years’ experience in delivering our full range of shipping services to over 70 different countries, to a growing international client list. As members of BIFA, we offer a flexible and fully tailored service, managing the whole shipping process for you from initial phone call to safe delivery. Contact our professional, friendly and highly experienced team today to discuss how we can accommodate your shipping requirements.