The performance of the air cargo industry, as measured in revenue ton kilometres, has dipped in recent years due to increases in fuel prices and surging passenger traffic. There was a slight dip in growth rates last year to 4.3%, compared with 4.6% in 2006. This was due to global economic and financial market uncertainties, resulting from the slowdown in the US and other major economies.

Global air cargo growth is expected to improve in the coming years, just as it did in 2006 and 2007 after the sharp fall in 2005. In the next 20 years, air cargo is expected to grow by 6.1% and world air cargo traffic is expected to triple from its current size. Such increased demand will require doubling the number of aeroplanes serving the freight fleet across the globe.

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The Asia-Pacific region is a major contributor to market share of freight ton kilometres. With 47%, the Asia-Pacific is followed by Europe’s 26%. The US contribution is 17%. The lowest contribution is from Africa, which is as low as 1%. The Middle East had the highest growth in air cargo traffic at 10.1% in 2007, but this figure was lower than the 2006 growth rate of 16.1%. The Asia-Pacific region slightly improved its cargo traffic growth rate from 4.7% in 2006 to 6.5% in 2007. As major contributors to air cargo movement, Europe’s and North America’s traffic grew slightly in 2007 at 2.7% and 0.7%, respectively.

India boosts freight

Of the 1.4 million tonnes of cargo movement into and out of south-west Asia, India contributes nearly 840,000 tonnes. In 2006-07, the four major airports of India saw a growth rate of 9.2% on the previous year. Of the four, the highest growth of 16.3% in 2006-07 was at Chennai. Delhi handled roughly the same amount of cargo in 2006-07 as in 2005-06. India and its neighbouring countries constituted nearly 3.9% of the global air cargo traffic in tonnage and 4.2% in ton-kilometres in 2005.

With its chronically underdeveloped roads and railways, India could develop its domestic air cargo capacity further. Since 1995, the country’s domestic air cargo market has expanded at an average annual growth rate of 12.5%. In 2005, the market was estimated to be 265,000 tonnes.

India has potential in the international freight market and also in its domestic market. Rising textile and garment exports from India, and from other industries such as pharmaceuticals, will further fuel the demand for air freight. Imports of small packages, capital equipment and technology products have considerable growth potential, due to the emergence of India as a business outsourcing hub.

National government initiatives to develop new airports and upgrade existing airports through public-private partnerships aim to attract investments totaling Rs400bn ($9.4bn). Plans to develop 35 non-metro airports have been prepared by the government. Similar efforts are under way for the international airports at Hyderabad, and for the upcoming one in Bangalore, as well as for the upgrading of both Delhi and Mumbai airports.

Indian carriers are hoping to capitalise on the booming Persian Gulf market and increasing traffic of goods and people between Asia and the Middle East – as are Middle East-based carriers. India’s Jet Airways, for example, announced in April the launch of two direct daily flights from Abu Dhabi to Mumbai and Delhi, and is waiting for negotiations to conclude on routes from Dubai.

Jet Airways regional manager

 

VM Kumar says: “Our low-cost affiliate, Jet Light, is also targeting the Mena [Middle East and north Africa] region and will launch routes to the GCC [Gulf Co-operation Council states] within four to five months. Despite the increasing fuel costs, we find that the GCC routes are now the most lucrative, and we expect 75% to 80% capacity in this market.”

Middle East connections

Bahrain Air’s inaugural flight to an Indian destination took off in May, travelling from Manama to Kochi, the largest commercial hub in the south Indian state of Kerala. The service will operate three times a week throughout the summer, becoming daily from October onwards.

Etihad, an airline based in the United Arab Emirates, says it plans to add Kozhikode, Chennai, Jaipur and Kolkata to its flight network in the coming year.

Middle East passenger traffic grew by 11.4% in 2007 and the region’s airlines are growing at an average annual rate of 10%, well above the global average.

“An increasingly attractive tourist destination and an ideal transit hub between, for instance, Europe and Asia, the Middle East aviation industry is collectively investing in important infrastructure, including new and expanded airports,” Adel Ali, CEO of Air Arabia wrote in the Gulf News in April. “Simultaneously, the trends towards the privatisation of services and selective open skies policies in some countries are making the industry more competitive.”

A new market for low-cost carriers, regional jets and business jets is emerging in the Middle East. There are four low-cost airlines in operation in the Gulf, and Dubai has announced that it will launch a budget carrier this year. The total regional jet fleet size in the region is expected to grow from 82 in 2007 to 243 by 2027, with 85% of the projected deliveries due to support the air transport sector’s growth (regional jets are those that seat 30 to 120 passengers and typically serve destinations within less than three hours’ flight time).

Brazilian aircraft manufacturer Embraer plans to set up a regional service and maintenance facility for executive jets in the UAE as it targets the Gulf’s growing business aviation sector. It has not yet been decided whether the facility will be in Abu Dhabi or Dubai; in either case it will be launched by the end of this year. But what the company is sure of is that the Middle East is one of the fastest-growing business jet markets, with demand coming from both corporate clients and charter service operators.

American manufacturing

North America remains the biggest market for regional jets, accounting for more than half of all confirmed orders. And although it faces challenges from rising international competition, continuing reductions in the US defence budget and a slowing worldwide economy, the US still holds the lead as the world’s number one aerospace manufacturer (see rankings, page 78).

Pockets of aerospace activity continue to thrive around the country. This autumn, Boeing Integrated Defense Systems will open a 7500-square-foot, multi-million-dollar experimentation centre in Suffolk, Virginia, that will support Defense Department and other government programmes using computer simulation in Hampton Roads. The centre will directly support Boeing and US Joint Forces Command in a three-year R&D agreement to analyse current, emerging and future joint war-fighting concepts. It is one of a growing number of high-tech companies blossoming in the area around the Joint Forces Command.

Colorado is home to more than 300 aerospace companies and seven large defence prime contractors. The University of Colorado has graduated more astronauts than any other university. Colorado State University, Colorado School of Mines and several other colleges and universities in the area are leaders in aerospace research. The 8th Continent Project, headquartered at the Colorado School of Mines, is the world’s most comprehensive programme to integrate space technology and resources into the global economy. It operates as one of the first aerospace incubators in the world and the first in North America.

Kansas is another hotbed for aerospace manufacturing. In 2006, Alcoa relocated its Aloca-SIE Cargo Conversions (ASCC) headquarters to Kansas City. “Kansas City has the ideal mix of convenient location, talented workforce and business-friendly government that we need to move our business forward,” says Gary Batey, president of ASCC. “Being close to the conversion work allows us to react more quickly to our customers.”

Business there is waning, however: Boeing and Raytheon now operate as final assemblers with less direct involvement in parts manufacturing. The trend is affecting the entire industry as aerospace companies separate parts manufacturing from final assembly and certification.

Bombardier-Learjet moved toward that business model years ago. Today, Learjet wings are manufactured in Ireland. In 2006, Bombardier Aerospace opened its component plant in Mexico. That same year, Cessna moved its harness work to Mexico. Raytheon moved its wire harness production to a supplier in Mexico in 2003.

Steady growth in Europe

Europe’s military market, although not nearly the size of that in the US, shows steady growth. Its strongest western European national markets are the UK, France, Italy and Germany. The UK is taking the lead in the unmanned aerial vehicle market.

EADS Defence & Security is expanding in Wales by establishing its risk assessment and management venture Apsys in Newport. “New technologies and evolving legislation are making risk management a critical aspect across industry sectors,” says Xavier Quayzin, UK business development manager at Apsys. “We have identified clear opportunities to expand our business and EADS DS is a centre of engineering excellence in Wales.”

The UK has the second largest defence budget after the US’s in dollar terms, and has increased defence spending over the past decade.

Latching onto the aerospace sector, SBAC Scotland was launched in June 2005 to represent the interests of Scottish companies in the aerospace and defence sectors.

Eastern Europe also competes for aerospace investment. Two years ago Honeywell opened its Aerospace Business Support Center in Prague. The goal was to position the company for future business in the region. n

Reporting by Gordon Feller, Courtney Fingar and Karen E Thuermer.

 

IN FOCUS

Iraq plans direct air services

Iraqi Airways is set for a comeback: it has ordered 40 planes from Boeing and half a dozen from Bombardier in a multi-billion-dollar deal, with an eye to launching a direct service between Baghdad and London and eventually European destinations as well.

Officials at the Iraq Development Programme, charged with attracting foreign investment into the conflict-ridden country, hope that the move will help to boost investor confidence.

“The ease of commercial travel to and from a country is of concern to businesses, including those that are interested in making foreign direct investment,” says programme director John Glassey. “There’s absolutely no question that this will help foreign companies looking to invest in Iraq to feel confident.”

Foreign airlines are taking an interest in serving Iraq, too: Austrian Airlines resumed flights between Vienna and Erbil in northern Iraq in April after halting the flights because of security concerns in August 2007.