Must-know: The key drivers of air cargo growth

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Sep. 17 2014, Updated 5:00 p.m. ET

Cargo traffic and capacity

The demand for transportation of cargo is measured by freight traffic kilometers (or FTK). It’s similar to revenue passenger miles (or RPM). It’s calculated as the weight of cargo in tonnes multiplied by the total distance travelled.

Similarly, available freight tonnes-kilometers (or AFTK) is a measure of freight capacity. Freight load factor (or FLF) is the measure of capacity utilization. Cargo revenue forms a small portion of the total airline revenue of major U.S. airlines—including Delta (DAL), United (UAL), American (AAL), Southwest (LUV), and JetBlue (JBLU)—as the major portion of revenue comes from passenger services.

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The cargo revenue drivers include the business confidence index, corporate profits levels, and industrial production, which drive cargo volumes. Industrial production increased for the sixth consecutive month in July (0.4%). According to the Bureau of Economic Analysis (or BEA), corporate profits increased at a quarterly rate of 8% in 2Q14 (or the second quarter of 2014) after declining by 9.4% in 1Q14.

Trend in global and North American freight traffic

According to the IATA (or the International Air Transport Association), global air freight volume has increased by 5.8% and capacity measured by AFTK increased by 2.8% year-over-year in July 2014. The increase in demand was supported by strong economic growth and business confidence.

The total air freight traffic market shares by region in terms of FTK are

  • Asia Pacific: 39.7%
  • Europe: 26.8%
  • North America: 14.5%
  • Middle East: 14.1%
  • Latin America: 3.2%
  • Africa: 1.8%

Freight volume in North America grew by 5.2%, but there was a decrease in capacity in North America and Latin America. While global freight load factor was 44.4%, North America recorded a 33.8% load factor for freight.

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