To represent, lead and serve the airline industry The Air Cargo outlook: trends, opportunities and...
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Transcript of To represent, lead and serve the airline industry The Air Cargo outlook: trends, opportunities and...
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
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
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
Introduction continued
I
A m
N ot
A n
E conomist
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.
Industry Overview
“Prediction is very difficult, especially about the future”Niels Bohr
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
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
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
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
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
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)
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)
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
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)
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
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
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
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
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)
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%
Source: Adapted from The Economist
This sums it up
REGULATORY
CONSTRAINTS
Thank-you
Any Questions?