First it was the 1997 Asian financial crisis. Then came the 2000 “dot-com” crash and the 2008 global financial crisis. In the most recent iteration of “black swan” events to ruffle the feathers of global business, the world has encountered Brexit. Perhaps more comparable to a sitting duck, the Atlantic fowl has found good company in the tariff standoff that is instilling tension between the United States and China. Two birds of a feather, Brexit and the tariff war are now wading aimlessly and can’t seem to decide when to depart or even their future destination.
Despite the general negative atmosphere regarding these events, air cargo providers are developing new strategies to accommodate these shifts resulting from global uncertainty, some with guidance from logistics providers, like Vienna-based logistics services company cargo-partner. Cargo-partner is a steadily growing company that, over the past year, has expanded its network footprint to include Singapore, Ljubljana and Budapest.
During the CNS Partnership Conference in Miami last month, Air Cargo World spoke with cargo-partner’s Chicago-based national product manager for air cargo, Jonathan Tolentino, about how the company and general industry are working to meet changes in market conditions influencing flows of cargo.
Q: What trends have you seen in cargo flows over the past few months?
Jonathan Tolentino: In the United States, volumes at the end of 2018 disappointed most industry players as we didn’t see the growth everyone anticipated. The International Air Transport Association released data for 2018 global airfreight markets showing that volumes grew by 3.5%, year-over-year, compared to 2017. This year also saw a slow start, but since March and April, cargo-partner has surprisingly seen steady growth in volumes, meaning that consumer confidence and demand is still there. We hope that it will be there the rest of the year, but, as of now, demand is there. There still is the issue of market uncertainty and the potential for higher cost and process complexity. International and domestic cargo flows are about equal, but we do see shifts in flows away from major airports to smaller ones both in Europe and the U.S. European exports to Asia have also increased, though not as much as the past few years, and the U.S. is becoming a more important market, though this will depend on how political situations evolve over the coming months.
Q: What factors do you think have influenced these changes the most and why?
JT: Good question. Everyone is still nervous about market uncertainty, but there is also a return in market confidence to a certain extent – the U.S. economy, for example, is doing well and unemployment is at a record low. The ongoing trade war between the U.S. and China and Brexit in Europe continue to play a large role in market uncertainty. However, you still see continuing investments in air cargo operations that suggests confidence persists. It depends with whom you are speaking, as the situation is affecting stakeholders differently.
Q: Have you seen any effects on volumes resulting from U.S. tariffs on Chinese goods?
JT: There have definitely been effects on volumes. Before the first wave of taxes from China in July 2018, importers panicked a little bit and demand during that time jumped because everyone wanted to ship goods ahead of the tariffs. After the first wave we’ve still seen steady volumes of imports into the U.S. Speaking of our group, the imports we’ve seen have been really strong and are continuing to increase. Are we concerned? Of course – everybody is because we really don’t know what will ultimately occur. At the end of the day, though, the U.S. and China still need each other and will likely come to some agreement. We are still concerned despite our steady volumes because the situation could change overnight.
Q: How is your company being influenced by these shifts?
JT: We have found that some of our customer base is looking into alternative options with suppliers – for example, in Asia some of them are moving operations to Southeast Asia. Southeast Asian airports are among the fastest growing in the world and production of various goods has shifted into the region, due to the rising cost of manufacturing in China. Volatile relations between the U.S. and China are also clearly of concern. Our company is expanding its presence to serve these shifts in cargo flows – we are currently looking into increasing our footprint in Taipei, Bangkok and Saigon. We also recently opened a sales office in São Paulo and will soon open one in Melbourne.
Q: What is your general outlook for the industry for the rest of 2019?
JT: Everyone is asking this question, and the easy answer is – no one knows. This has to do with the general mood of the industry, like we mentioned earlier. There is still uncertainty stemming from the U.S.-China and Brexit issues, but this is also countered by optimism. Shippers and stakeholders generally perceive the second half of the year as potentially being quite positive because customer demand is still there, but this optimism is still very cautious.Like This Post