Air cargo markets 

Air cargo demand softened 

After an exceptional performance in 2021, air cargo demand declined 8.0% in 2022 due to several challenges throughout the year. Inflation reached historical highs, curtailing the spending capacity of households and reducing trade, and the ongoing war in Ukraine furtherdisrupted trade flows. The unusual strength of the US dollar also made certain commoditiesmore expensive in local currency terms. Compared to the pre-pandemic period, industry cargo tonne kilometers (CTKs) in 2022 tracked close to their 2019 levels, contracting 1.6%. North America and Africa were the only two regions with CTKs above 2019 levels throughoutthe year. Airlines in Latin America recovered following the lengthy restructuring processes in2021 and their cargo traffic is close to pre-pandemic levels. 

Source: IATA S&E Economics, using data from IATA Monthly Statistics

Global trade growth outperformed air cargo demand 

Global goods trade continued to rise from January to October 2022, albeit at a slower pace than in 2021. In contrast, air cargo CTKs experienced twelve consecutive months ofcontractions beginning in March 2022, suggesting that the growth of global trade benefitted maritime transportation more than air transportation. As the demand for goods softenedcompared with the previous year, businesses experienced less inventory pressure to fulfillorders, reducing their need to use air transportation to replenish stocks quickly. 

 Source: IATA S&E Economics, using data from IATA Monthly Statistics and Netherlands CPB

Declining cargo load factors put downward pressure on cargo yields 

Due to increased capacity and lower demand, cargo load factors dropped back to theirpre-COVID range. The rise in air cargo capacity has largely been driven by the restoration ofbelly capacity from passenger aircraft since May 2021, while the capacity of dedicated freighters has been declining since December 2021. Although air cargo yields reached anall-time high in December 2021, they started to fall for most of 2022. Yields are still higherthan their pre-COVID levels. But given that load factors are back to their normal range, the downward trend in yields may continue well into 2023. 

Source: IATA S&E Economics, using data from IATA CargoIS

Preighters were phased out in 2022 

Despite the strong comeback of passenger aircraft belly capacity, the share of international CTKs transported by passenger aircraft remains lower than pre-pandemic levels. Cargovolumes transported by passenger aircraft and by dedicated freighters were previously balanced. During the crisis period, passenger aircraft were used as cargo-only carriers, called “preighters,” to address the capacity shortage. They transported 16% of total international CTKs in 2021. As air passenger demand recovered in 2022, however, preighters were phasedout, and passenger aircraft only carried about 30% of total international CTKs. By December2022, preighters accounted for just 1% of total international CTKs. 

Source: IATA S&E Economics, using data from IATA Monthly Statistics 

Export orders contracted 

The purchasing managers’ index (PMI) for export orders is historically a leading indicator of air cargo demand. The key 50-mark indicates there are no changes in export orders,compared to the previous month. The PMI was in below-50 territory for much of 2022—February being the only exception—which signals a deterioration in new exportorders and thus in air cargo demand. However, the recent upward trends observed in January and February 2023 imply a possible improvement in air cargo demand for 2023. 

Source: IATA S&E Economics, using data from IATA Monthly Statistics and Markit 

Maintaining air cargo’s positive progress

The air cargo business has been reshaped as a result of the COVID-19 pandemic. Its contribution to the bottom line of airlines is more evident, for example, with both revenues and yields remaining above pre-pandemic levels. However, air cargo volumes have comeunder pressure since mid-2022 as governments introduced economic cooling measures. Nonetheless, industry growth drivers, such as the expanding middle class, the need for quickdelivery of high-value goods and pharmaceuticals, and the growing e-commerce market are strong. To maintain air cargo’s positive development, the industry is focusing on the following areas: 

● Sustainability 

● Digital Transformation 

● Safety

Sustainability 

Sustainability is a priority for the entire aviation industry, including air cargo. The development of sustainable aviation fuels (SAF) has emerged as the key driver in realizing net zero carbon emissions by 2050. The increased production of SAF has led to growing demand from shippers, customers, and regulators for immediate carbon-neutral shipping options and assurances of sustainable operations. To address this need, IATA has made significant progress 

in three key areas: 

● Effective CO2 Emissions Calculations 

To ensure CO2 data transparency, accurate and standardized emissions calculations areessential, and IATA is aiming to provide airlinespecific data linked to actual fuel burn, in conjunction with the industry-approved methodology,RP1678. This will provide the 

basis for CO2 Connect for Cargo, a tool that will provide reliable and standardized emissions 

calculations. 

● IEnvA for Cargo 

The reach of the IATA Environmental Assessment (IEnvA) program has been extended tovarious stakeholders in the air cargo value chain, including airports, cargo handling facilities,freight forwarders, and ramp handlers. This enables a collective move towards a more sustainable industry. 

● Waste Reduction across the Cargo Supply Chain 

The cargo industry is actively collaborating to reduce waste generated throughout the cargo supply chain, including plastic. Through concerted efforts, such as optimizing packaging, exploring alternative materials, and implementing recycling initiatives, a more sustainable and circular economy within the cargo industry will be fostered.

Digital Transformation 

Digitization is another key priority for the air cargo industry, focusing on the following three main goals: 

● 100% Airline Capability of ONE Record by January 2026 

Work across the industry to ensure the full implementation of ONE Record by January 2026 continues. The various data standards in use for transporting documents will be replaced with a unified record for every shipment, streamlining processes and enhancing efficiency. 

● Developing Digital Standards to Support the Global Supply Chain 

Tracking device standards, known as the IATA Interactive Cargo guidelines, have been finalized, improving the monitoring of the quality and accuracy in worldwide shipping of time and temperature-sensitive goods. Additionally, collaboration with the EuropeanCommission’s “FEDeRATED” project supports the development of interoperable technologies and data architectures for multi-modal transport. 

● Compliance and Support for Digitalized Customs and Trade Facilitation 

Aviation is working with governments to reduce operational barriers at borders, and securethe flow of goods. Notably, IATA has been actively supporting the rollout of the EU’s Pre-Loading Advance Cargo Information (PLACI) System, contributing to the industry’s modernization. 

Safety 

Safety is a primary concern for the air cargo industry, with a particular focus on the safetransportation of lithium batteries. Efforts in this area have centered on: 

● Stopping Rogue Shippers 

IATA has been actively urging civil aviation authorities to take strong action against rogue shippers, emphasizing the importance of complying with shipping regulations. Moreover, IATA is advocating for government support of ICAO’s efforts to strengthen the standards outlined in Annex 18: The Safe Transport of Dangerous Goods.

● Enhancing Countermeasures 

IATA has been collaborating with the European Union Aviation Safety Agency (EASA) and the Federal Aviation Administration (FAA) to develop a test standard for fire-resistant aircraft containers in the event of a lithium battery fire. The goal is for Unit Load Devices (ULDs) to be capable of containing a lithium battery fire for up to six hours, thus mitigating potential risks. 

● Addressing the Challenge of Lithium Battery-Powered Vehicles 

IATA has successfully established a single standard for identifying all lithium battery-powered vehicles, including hoverboards, e-scooters, e-bikes, and traditional passenger vehicles, throughout the transport process. This new standard, which comes into effect on 1 January2025, will ensure consistency and safety in the transportation of lithium battery-powered vehicles. 

● Expansion of CEIV Lithium Battery Program 

IATA’s Center of Excellence for Independent Validators (CEIV) Lithium Battery program has experienced significant growth in the last 12 months with 31 companies now certified. This program encompasses the entire supply chain, including airlines, freight forwarders, cargo handling facilities, and shippers. 

Content excerpted from Annual Review 2023 (Last edition (June 2023)) published by IATA.
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