What is going on with all this good news?

  • David Harris
  • July 28, 2017
  • 0

Demand for air freight is growing so strongly that Panalpina issued a warning to shippers to book now for peak season, or risk having their cargo stay on the ground.

A quick glance through some of the recent headlines on CargoFacts.com leaves us with the feeling that there is nothing but good news. New cargo carriers starting up, one month of double-digit demand increase after another, quarterly reports trumpeting record or near-record operational and financial performance, air freight rates rising month-over month and year-over-year…

And as if that were not enough, Panalpina yesterday published a warning to shippers that, with the good times likely to continue rolling through the rest of the year, the onus was on them (the shippers) to book capacity now, or risk having their peak season cargo “not being uplifted at all.” Oh, and by the way, said Panalpina, the longer you wait, the more expensive it will be.

Obviously, anyone in the air freight business will be happy with an environment of increasing demand and increasing yields, particularly when it appears that, at least in the near term, things are only going to get better.

But wait. How can this be? Turn back the clock a year and think about what the general sentiment was then. What the outlook for the future was then. Weren’t there headlines about the rise of protectionism? Didn’t IATA point (in almost every monthly traffic report) to increasing numbers of protectionist measures put in place by governments around the world? Didn’t Donald Trump’s promise to “put America first” have everyone believing that world trade would collapse? Didn’t the UK’s vote for Brexit signal even more protectionism?

What is going on? How can demand for air freight – which depends on world trade – be growing so strongly in an environment so poisonously protectionist?

Well, it turns out that the environment may not be as protectionist as was generally believed.

Since last October, the World Trade Organization (WTO) registered the lowest monthly average implementation of new trade restrictions since the financial crisis of 2008, providing a surprising indication that the tide of protectionism has begun to turn.

  • On the anti-trade side, the report found that 74 new trade-restrictive measures were initiated by member states during the review period, but this was more than offset by 80 new global measures aimed at facilitating trade.
  • The anti-trade measures include new or increased tariffs, customs regulations and quantitative restrictions, while the pro-trade measures include eliminating or reducing tariffs and simplifying customs procedures.

In the report, WTO Director-General Roberto Azevêdo said: “I urge members to redouble efforts to refrain from implementing new trade-restrictive measures, and to reverse existing measures.” Whether, in the long term, the world will heed his call, or whether protectionist politicians like Donald Trump and Teresa May will have their way remains to be seen. But for now, and for the near future, it looks like freer trade – and consumers’ desire for more, better, and cheaper goods, regardless of origin – will continue to boost demand for air freight.

Join us at the Cargo Facts Symposium in Miami, 2 – 4 October, to see how the third quarter played out, and hear thoughts about the future from senior executives from all branches of the air freight industry. To register, or for more information, go to CargoFactsSymposium.com.

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