Forecast Boeing

Foreword
The Boeing Company issues the biennial World Air Cargo Forecast (WACF) to provide a comprehensive, up-to-date overview of the air cargo industry. The forecast summarizes the worlds major air trade markets, identifies major trends, and presents forecasts for the future performance and development of markets, as well as for the world freighter airplane fleet. A strongly resurgent world air cargo industry characterizes the market for the 2004/2005 edition. Traffic has grown nearly 11% during the first half of 2004 relative to 2003, when concern over the Iraq War and the severe acute respiratory syndrome (SARS) crisis in Asia curbed industry growth. If the current momentum of world air cargo traffic growth is maintained through the end of 2004, it will mark the first double-digit percentage growth year for the industry since 1997. In this edition of the WACF, new data sources were used to help model air cargo flows into and out of Europe, which has improved our understanding of the continents air trade patterns. It is hoped that this new data will improve the usefulness of WACF for all readers. Data represented as historical in this document were compiled from many sources, including, but not limited to, Air Cargo Management Group, the Air Transport Association (ATA), the Association of Asia-Pacific Airlines (AAPA), the Association of European Airlines (AEA), Boeing Foreign Trade Database (TRADE), Global Insight, the International Air Transport Association (IATA), International Civil Aviation Organization (ICAO), and U.S. Department of Transportation (DOT) Form 41. Historical information is updated each year as individual sources revise their respective databases. This document would not be possible without the efforts of several contributors. The Boeing World Air Cargo Forecast 2004/2005 production team included the Creative Services Group design, production, and web teams; the Writing and Editing Services team; and our colleagues in marketing, John Riley and Lee Hibbets. Special thanks are extended to Mr. Thomas Klein (www.contrails.de) and Mr. Tom Hoang for their photographic contributions on the cover of this years edition of WACF. Mr. Klein contributed the Cargolux 747-400F photograph that adorns the cover, and Mr. Hoang is the photographer of the Cathay Pacific 747-400F. The next update to the WACF will appear fourth quarter 2006. The authors welcome any questions or comments readers may have. All queries and suggestions should be directed to The Boeing World Air Cargo Forecast Team Boeing Commercial Airplanes P. O. Box 3707, MC 21-33 Seattle, WA 98124-2207 USA Fax: (206) 766-1030 Web:http://www.boeing.com/commercial/cargo/index.html Tom Crabtree 206-766-2576 thomas.crabtree @boeing.com
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Tom Hoang 206-766-2568 thomas.l.hoang @boeing.com
Jim Edgar 206-766-2643 james.r.edgar @boeing.com
World Air Cargo Forecast 2004/2005
Table of Contents
Executive Summary and Significant Industry Trends
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World Overview and Forecast North America
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Latin America and North America Europe and North America Intra-Europe Middle East
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Africa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49 Asia and North America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .55 Europe and Asia Intra-Asia
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Southwest Asia
Commonwealth of Independent States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .79 Domestic China

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World Freighter Fleet
Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .99 Appendix

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Table of Contentse
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Summary
After the dramatic 5.8% drop in 2001, induced by a simultaneous slowing of the worlds largest economic groupings, collapse of the technology bubble, and terrorist attacks, traffic increased more than Major Air Cargo Markets Rebounded Strongly 7% in 2002. In spite of During the First Half of 2004 the challenges of a major Monthly percentage of change over prior year 30 Middle East conflict as well as the severe acute respiratory syndrome (SARS) crisis, 20 the market showed surprising strength in 2003 with annual 10 growth of nearly 4%. Also 0 encouraging is the unusual market strength indicated Monthly percentage change Average 12-month history 10 by a further 10.7% increase in worldwide traffic for the first 5 months of 2004, Jan 99 Jan 00 Jan 01 Jan 02 Jan 03 Jan 04 compared with the same period in 2003. Economic activity, as measured by world gross domestic product (GDP), remains the primary driver for air cargo industry growth. World GDP growth exceeded 2% in both 2002 and 2003. Sustained near-term economic recovery looks likely as long as investor and consumer confidence remains strong. Other significant risks, though, include high oil prices and rising interest rates.
2003 Air Freight Growth by Major Market

World North America EuropeNorth America AsiaNorth America North AmericaLatin America EuropeAsia Intra-Asia Domestic China 3.9% 0.7% 2.5% 1.2% 0.9% 6.1% 6.7% 9.4%
World air cargo traffic will expand at an average annual rate of 6.2% for the next two decades, tripling over current traffic levels. Asian air cargo markets will continue to lead the world air cargo industry in average annual growth rates, with the domestic Chinese and intra-Asian markets expanding 10.6% and 8.5% per year, respectively. As in the past, more mature North American and European markets reflect slower and thus lower than average traffic growth rates, with the exception of those linked to Asia and Southwest Asia. Since 2001, the overall worldwide freighter fleet has remained relatively constant in number. However, because of larger freighters replacing smaller cargo aircraft through 2003, capacity increased more than 4% per year.
This trend will continue over the next 20 years as well, with capacity increasing parallel to the tripling traffic levels, but with fleet size not quite doubling from 1,766 in 2003 to 3,456 in 2023. Medium -widebody and large cargo aircraft will lead fleet additions, growing from an overall share of 44% to 60% as traffic continues to build on long-haul, international trade lanes.
Yield Trends
Ongoing profit challenges at passenger airlines have focused airline attention on lowerhold revenue cargo market opportunities. Cargo revenue represents, on average, 15% of total traffic revenue, Yield Trends Reflect Both Productivity Gains and Industry Competition with some airlines aiming to Index (1985 = 1) earn well over half of their 1.50 Passenger yield revenue from this source. Freight yield Continuing industrywide Passenger yield 1.25 declines in yield, for both 19852003 1.7% 19932003 2.4% cargo and passenger services, reflect productivity gains, 1.00 technical improvements, and intense competition. Freight yield 0.75 They also create pricing 19852003 2.4% pressure on all industry 19932003 0.5% segments (e.g., lower 1985 1991 1997 2003 aircraft acquisition and operating costs). Since 1985, the decline in scheduled freight yield has averaged 2.4% per year, after adjusting for inflation. Scheduled freight yields firmed from 1989 through 1991 and from 1993 through 1995, but then resumed their decline until 1998. From 1999 through 2001, freight yields stabilized and slightly increased by the end of 2001, owing to strong demand in 1999 that resulted from Y2K uncertainties, then increased further with fuel surcharges. From 2002 through 2003, the air cargo industry witnessed a spike in freight yield, 14.9% and 6.2%, respectively. The increase in freight yield over the last 2 years can be attributed, by and large, to the U.S. West Coast Port Strike and SARS, which produced a cargo capacity shortage in certain major markets. Worldwide economic recovery, bolstered by the fuel and security charges imposed during this period, also contributed to the gain in air freight yield.
Widebody ACMI Services

The freighter wet-lease airline, or aircraft, crew, maintenance, and insurance (ACMI) provider, satisfies important market requirements by offering airlines flexibility to contract for air transportation services Over 8% of World Air Cargo Traffic Is Moved by ACMI Providers on a trial basis where demand RTKs, billions is uncertain, augment existing 16 markets, and/or provide 17.9% service in markets that average 12 are highly seasonal annual growth without an investment in per year dedicated equipment. 8 ACMI services are offered for all freighter sizes, but most 4 growth since the late 1990s has been in long-haul, 1991 1995 1999 2003 intercontinental widebody freighter markets. Traffic carried by ACMI widebody carriers has grown 17.9% per year since 1990. For 2003, air cargo traffic on these carriers grew 9.3%, following growth of 5.7% for 2002 and a contraction of 14.4% for 2001. In 2003, ACMI carriers transported approximately 8.2% of world air cargo traffic. As air cargo traffic growth continues to periodically outpace capacity in many markets, ACMI carriers will continue to assist traditional carriers in meeting overall air cargo demand.
International Express
The distinction between express and general air cargo continues to blur as traditional providers expand their time-definite offerings, air cargo firms consolidate, and postal authorities make inroads as full-fledged logistics providers. Ultimately, the air cargo customer benefits from improvements, increased service options, and lower prices as market pressure brings competing products into the market. This rapid evolution, however, makes a time-study comparison of the international express segment much more challenging.
As a result of this provider and service expansion, international express has grown at more than twice the rate of total worldwide air cargo traffic, averaging 16.4% annually over the last decade (as measured in revenue tonne-kilometers [RTK]). Since 1998, however, while still impressive, annual growth has been a somewhat lower 9.1%. This parallels the express industrys strong double-digit U.S. domestic growth during the 1970s and 1980s, followed later by slower growth. As a proportion of total international air cargo traffic, international express expanded from 4.1% in 1992 to nearly 11% in 2003, a reflection of higher than average annual growth. Average international express shipment size grew from 2.7kg (6.0 lb) in 1992 to 4.0kg (10.7 lb) in 2003, further bolstering the overall express component of international air freight traffic. As businesses continue to expand beyond domestic or close regional markets, the international express sector will continue to grow, albeit at more sustainable, long-term rates.
Significant Developments
Each of the following issues either currently affects or has the potential to create significant impact on the air cargo industry. Security requirements. Of all recent industry developments, government-mandated security regulations present the highest potential for adverse impact upon the air cargo industry. They may have debilitating effects on shipment transit time. After disconcerting reactions to 9/11 (many since rescinded or modified), the industry must be diligent in working with authorities to realize security enhancements that are balanced with a timesensitive industrys realities. Service fragmentation. The issue of air cargo service hubbing versus point-to-point often comes up in the context of passenger transport. Compared with the passenger business, air cargo is more concerned with time and efficiency than routing. Hubbing then becomes a more acceptable alternative to cargo customers when significant handling, volume, and rate efficiencies can be realized. Low-cost carriers. Another passenger business phenomenon that has implications for air cargo is the proliferation of low-cost carriers. The demands of passenger focus and operational efficiency (e.g., quick airplane turnarounds) reduce the priority of cargo. However, some low-cost carriers realize significant revenues by emphasizing express shipments and/or by contracting with other airlines to handle their lower-hold space.
World Air Cargo Growth Detail

Over the next 20 years, world air cargo will grow at 6.2% per year. Air freight will grow more rapidly than mail, averaging annual growth of 6.3% through 2023. Mail RTKs will show steady growth of 2.9% during the same period.
Meanwhile, world traffic will more than triple during the next 20 years, increasing from 156.5 billion RTKs in 2003 to more than 518.7 billion RTKs in 2023. The international market will outpace domestic growth, exceeding 83.7% of total RTKs by year-end 2023. U.S. carrier share of the world market, currently assessed at 29.8%, will decline to 23.4% by 2023. The greatest air freight market growth is expected in those markets linked to Asia.
Freighter Fleet
The freighter fleet will nearly double over the next 20 years, from 1,766 to 3,456 airplanes. Freighters as a share of the total airplane fleet will fall from 11% to 10%, owing to an increase in the size of the average freighter. Taking 1,260 retirements into account, 2,950 airplanes will be added to the freighter fleet by 2023. Widebody freighters, currently 44% of the fleet, will supply over half of these additions and will conclude the period with a majority 60% share of the fleet. The number of widebody airplanes will nearly triple. The shift toward widebody freighters will result in a fleetwide increase in average freighter airplane payload. Operators often prefer medium widebodies as a replacement for retiring medium standard-body freighters. Thus, the share of standard-body freighters will decrease from 56% to 40% over the next two decades. By 2023, freighters of all sizes will provide more than half of the worlds total air cargo capacity, a slight increase from today. Slightly more than three quarters of freighter fleet additions during the next 20 years both market-growth and replacement aircraft will come from modified passenger and combi airplanes. Nearly half of these conversions will be widebody conversions. By 2023, a total of 724 new production freighters will enter the fleet. Although new airplanes will be a minority of the world freighter fleet by 2023, many airlines prefer the technical advantages, reliability, and fuel efficiency of new airplanes. Large freighters will account for 60% of new air cargo deliveries. The value of all the new freighters totals $139 billion in current U.S. dollars.
Executive Summary and Significant Industry TrendsTitle
World Overview and Forecast

World Economic Environment Favors Continued Growth
Despite high oil prices and rising interest rates, the world economic recovery continues. North American and Asian growth lead the rest of the world, largely owing to the strong U.S. consumer sector, World Economic Growth, GDP government stimulation Annual change, percentage (in the form of tax cuts), 6 low interest and inflation rates, and a boost from improved investor and consumer 4 confidence. Weak European and Japanese consumer sectors represent a major 2 drag on the global economy. Beyond economic and geopolitical risks, the world economy hinges on the 1975 1979 1983 1987 1991 1995 1999 2003 sustainability and strength of U.S. economic growth. Worldwide GDP growth is expected to average 3.0% per year through 2023, after exceeding 2% annual average growth for the past 2 years. This major driver of international trade growth will World Air Freight, RTKs help stimulate an air freight Annual change, percentage growth rate that is at least 15 double the GDP growth rate. The continuing trend toward 10 globalization of sourcing, manufacturing, assembling, 5 and distribution linked as it is with the potential efficiencies 0 and competitive advantages that air cargo offers account -5 for much of the air cargo growth rate differential. 1975 1979 1983 1987 1991 1995 1999 Other factors that affect the airborne freight growth rate include available capacity, cargo yields, relative currency strength, regulations, and national industrial initiatives. Air freight markets expand and shift with the patterns of economic growth in developing countries. A combination of infrastructure development and consumer spending turns domestic demand into the primary engine of recovery and growth, making developing nations less dependent on exports, which alters trade flows. In later stages of development, economies become net consumers, as opposed to economies in early stages of development, which are net producers.
2003
After a precipitous decline of 5.8% in 2001, world air cargo revenue tonne-kilometers (RTK) rebounded by more than 7% in 2002 and nearly another 4% in 2003. Correspondingly, yields (adjusted for inflation) firmed, increasing nearly 15% in 2002 and more than 6% in 2003.
World Air Freight Yield

Annual change, percentage
20
10
10
2003 World Air Cargo Components
1975
1979
1983
1987
1991
1995
1999
2003
World air cargo comprises freight (scheduled, charter, and express) and mail, with scheduled freight and express being the largest components. More than 70% of total traffic is carried by non-U.S. airlines, 2003 Domicile Market Share which have a historic growth rate of scheduled freight that outpaces U.S. carrier U.S. charter Non-U.S. charter, 4.2% growth. Overall U.S. carrier traffic has seen 4.7% U.S. mail, 2.7% Non-U.S. mail, 1.7% continuing marginal share decline in recent years, as a result of the maturing of their U.S. Non-U.S. domestic express market. scheduled This has more than offset an increase in U.S. charter airborne freight tied to activity in the Middle East. In fact, as a result of dramatic U.S. charter traffic growth during 2003, the U.S. share of the charter air freight segment has surged to more than half of the worlds total charter market, though the segment is still small in comparison with scheduled air freight.
scheduled 64.3% 22.4%
156.5 billion RTKs
World Charter Air Freight

RTKs, billions
15
U.S. charter freight Non-U.S. charter freight
10
World Scheduled Air Freight

RTKs, billions
150
U.S. scheduled Non-U.S. scheduled
100
1970
1975
1980
1985
1990
1995
2000
50
1970
1975
1980
1985
1990
1995
2000
Forecasting Methods
Several approaches have been developed to handle both the range and complexity of managerial forecasting problems. Each has its special use, and some care should be taken when selecting Demand Pulls Air Cargo Traffic the appropriate approach for a specific application. Four approaches Air/sea/land costs econometric modeling, Products Economic judgmental evaluation, Exchange rates trend analysis, and Activity potential analysis Relative provide useful forecasts. prices
Exporter Importer
Econometric modeling helps determine the overall importance of underlying economic factors and provides actual forecasts that are linked to expectations of the factors. This method is useful for medium-range forecasts in regional markets. Conceptually, the demand for air freight depends on the economic activity in the importing region or country, conditioned by transportation costs, exchange rates, and relative prices. Econometric modeling may be used to predict demand, assuming that adequate capacity will be in place to transport the demand and that factors not included in the model will exert the same influence as in the past. Judgmental modifications often account for expected changes in noneconometric growth factors. For example, estimating the impact of bilateral agreements, trade quotas, restrictions on night operations, and changes in trade patterns could be vital to forecasting for an airlines strategic plan. Incorporation of anticipated capacity increases, route restructuring, and market programs also can contribute to more reasonable forecasts. A simple trend analysis often is used to evaluate changes in economic factors. This approach is useful in evaluating general changes in the marketplace that can be attributed to the combined effects of a number of factors. Such trends can be extrapolated into the future. However, extrapolation from a small base with large growth can result in very unrealistic results. Potential analysis is an approach for forecasting airborne trade in markets during early stages of market development. Previous research of trade patterns suggested that commodities with value greater than US$16 per kilogram would potentially be transported by air. Following this result, a potential airborne cargo market can be determined from the tonnage of traded goods (regardless of mode) with value that exceeds US $16.
Market Environment
Although economic activity is the primary influence affecting world air cargo development, it is still necessary to recognize the effects of other factors, some of which are influenced by airline activities. Examples of Forces and Constraints for Air Cargo Growth airline activities that influence air cargo development include the acquisition of aircraft and expansion of services, which have had particularly favorable impacts on the express and small-package market. Factors beyond the control of airlines include inventory management techniques, globalization, market liberalization, national development programs, and continuing introduction of new air-eligible commodities, all of which play significant roles in air cargo growth.
Industry relocation
Trade quotas and restrictions Export promotion New commodities Widebody freighters, combis, and lower decks Airline market research World and regional GDP growth Airline markets and shipper education Shipper utilization Proliferation of points served
Directional imbalances
Currency revaluations
New trade relationships
National development programs Oil price and availability Deregulation
Surface competition
Express market Just-in-time concepts
Airport curfews
Constraints to growth, primarily labor stoppages bilaterals originating outside the airline industry, can hinder industry growth just as dramatically. A variety of air transport industry constituencies and policymakers continue to address these issues, both positive forces and constraints, in an effort to facilitate air cargo growth. Various issues affecting worldwide economic growth can be categorized as favorable or unfavorable to the industry.
Air and surface
Renegotiated
Favorable
Asian market expansion Currency strength Middle East stability National debt management plans Oil marketing agreements Easing interest rates
Unfavorable
Trading blocs and protectionism Terrorism and armed conflict Political volatility Commodity price weakness High interest rates Debt burdens
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Strong Relation of Air Cargo Traffic to GDP

World gross domestic product (GDP) is the sum of all goods and services produced in the countries of the world. This sum represents the best single measure of global economic activity. The resulting Air Cargo Growth Is Influenced by GDP Growth demand for transportation GDP annual growth, percentage RTK annual growth, percentage services provides opportunities 15 6 RTKs for air cargo growth. GDP Therefore, a strong 4 10 correlation exists between changes in world GDP 5 2 and changes in world air cargo traffic.
0 0
The dynamic nature of air 5 2 cargo traffic is demonstrated by differences in average annual growth. For more than 1983 1987 1991 1995 1999 2003 three decades, air cargo traffic (measured in RTK) has expanded about 7% annually, or more than 2.3 times faster than the rate of GDP growth. During the past several years, growth has been stimulated by service improvements, shipper awareness, success of the express and smallpackage business, and increasing recognition of air cargo benefits to global enterprises. The unique characteristics of and opportunities afforded by air cargo will allow growth to continue to outpace GDP growth.
World Economic Growth

For the past 2 years, Asian economic growth was the strongest in the world, with North America also exceeding world averages. Europe and North America experienced smaller increases in 2003 than in 2002, but because of Asias strength, worldwide average growth rose from 2.0% to 2.2%.
Economic Growth
Real GDP annual change, percentage
8 History Forecast
Asia North America World Europe
1983
1988
1993
1998
2003
2008
2013
2018
2023
11
An increasingly interrelated world economy is forecast to expand at an average of 3.0% annually through the year 2023. The long-term North American growth rate is expected to average 2.9% per year over the same period. Similarly, Europe is projected to grow about 2.3% per year during the next 20 years.
World GDP Growth

Growth, annual percentage change for 2003 through 2023
Peoples Republic of China Latin America Africa Middle East Asia North America Europe Japan 5 6
1 3 0 2 4 Asia will continue to lead the worlds economies with projected growth of 3.3% per year between 2003 and 2023. China, in turn, leads individual-country long-term growth with a 5.8% annual increase, as contrasted with Japan at 1.7% per year.
Asias share of world GDP is projected to rise from 24% in 2003 to 25.5% in 2023. North America and Europe will account for 56.8% of worldwide GDP in 2023, which is a decline of 4.6% from the present share.
World Air Cargo Forecast

World air cargo is the sum of freight and mail. Economic models for each of the components indicate that total air traffic is strongly related to per capita world GDP and average yield. Mail RTKs, which were determined to depend less on yield than freight RTKs, correlated strongly with world GDP.
World Air Freight Market Will Grow 6.3% per Year Through 2023
RTKs, billions
800 History Forecast Average annual growth percentage 20032023 High 7.5% Base 6.3% Low 5.1% 6.2% growth per year 200
High Base Low
600
400
1993
1998
2003
2008
2013
2018
2023
12
Low, baseline, and high annual growth of 5.1%, 6.3%, and 7.5%, respectively, are forecast for world airborne freight. High and low scenarios portray GDP changes of 0.5% above long-term expectations and 0.5% below, respectively. Worldwide air freight is expected to more than triple over the next 20 years, increasing from 149.6 billion RTKs in 2003 to 506.5 billion RTKs by 2023. World airmail is forecast to grow consistently at 2.9% per year. Factors that could affect the future growth for airmail include inroads by express operators into package mail, reliance on Internet communication, entry of traditional postal services into express air freight operations, and more stringent security requirements. The world baseline cargo forecast predicts that traffic will more than triple between 2003 and 2023. Worldwide traffic will grow from 156.5 billion RTKs in 2003 to more than 518.7 billion RTKs by 2023. Sustained economic growth, along with decreasing yields, contributes significantly to the growth of the air cargo industry.
World Airmail Will Grow 2.9% per Year Through 2023

RTKs, billions
20 History Forecast Average annual growth percentage 20032023 High 3.3% Base 2.9% Low 2.4%
High Base Low
16
12
2.6% growth per year
1993
1998
2003
2008
2013
2018
2023
World Air Cargo Will Grow 6.2% per Year Through 2023
RTKs, billions
High Base Low
600
400
1993
1998
2003
2008
2013
2018
2023
Share of World Market by Carrier Domicile

2023 2003
U. S. 23.4%
U. S. 29.8% Non U. S. 70.2% Non U. S. 76.6%
13
As emerging economies develop, the non-U.S. airline market share of air cargo traffic will continue to expand. As we approach 2023, non-U.S. airline market share will reach 77% of total air cargo RTKs, Domicile Share of International and Domestic Traffic up from slightly more than 70% recorded in 2003. 2023 Non U.S., 7.4% Non-U.S. airlines will 2003 Domestic Non U.S., 4.7% continue to dominate Domestic U.S. U.S. long-haul international U.S. U.S. 8.9% 14.5% 13.4% 16.4% routes, representing nearly 70% of the worlds traffic by 2023 from slightly Non U.S. Non U.S. 65.5% 69.2% over 65% in 2003. Traffic carried by U.S. airlines will also grow during the forecast International International period as U.S.-domiciled express carriers increase international service. The dominance of U.S. carrier domestic traffic as a share of the worlds total will fall from 13.4% to 8.9% by 2023, reflecting slower growth rates and the emergence of domestic markets like China.
Regional Air Cargo Markets

Air cargo markets linked to Asia, especially the Pac 12, will lead all other international geographic markets in average annual growth during the period of 2003 through 2023. Intra-Asia will grow the fastest Asian Cargo Markets Will Continue to Lead the Industry... of Asian markets, averaging Growth, percentage 8.5% growth per year, while Domestic China IntraAsia the AsiaNorth America AsiaNorth America and EuropeAsia markets AsiaEurope will expand at average annual EuropeSouthwest Asia rates of 7.2% and 6.7%, EuropeLatin America Latin AmericaNorth America respectively. Domestic China EuropeNorth America will be the fastest growing IntraEurope contiguous market in the EuropeAfrica World average, 6.2% world, averaging 10.6% EuropeMiddle East North America growth per year for the forecast period. 0 2 4 6 8 10 12
14
The mature markets of North America and intra-Europe will grow below the world average rate, with 20-year annual growth rates of 4.1% for North America and 5.3% for Europe. The North America ...and Increase Their Share of World Cargo Latin America market is Share of world total market, RTKs percentage forecast to grow 5.9% 30 Year 2003 Year 2023 per year. Also projected to lag behind the world average growth rate are 20 trade lanes linking Europe to Latin America (at 6.0% growth), North America 10 (at 5.6% growth), Africa (at 5.2% growth), and the Middle East (at 4.7% growth). North America North America IntraAsia Europe Europe Domestic China Asia Africa Latin America EuropeSouthwest Asia Europe North America Europe Europe North America Intra (at 6.4% growth) will slightly Asia Europe Middle East Southwest Asia Latin America Europe exceed the world average. Market shares will continue to change as a result of varying regional growth rates. While growing 10.6% per year over the next 20 years, domestic China will still possess a relatively small market share, given its current size and the markets relatively short average trip distance. Overall, the share of world air trade connected to Asian markets, including the domestic markets of China and Japan and all international markets, will increase from 47.6% in 2003 to 59.4% in 2023.
15
North America
North America Market Grew in 2003
The North America market consists of air freight moving to, from, and within Canada and the United States. The North America market accounts for 14.3% of the worlds air cargo traffic in tonne-kilometers and 22.6% in pure tonnage. In 2003, the North America market grew 0.7%, following growth of 1.9% in 2002, and a contraction of 9.8% in 2001.
U.S. Domestic Air Cargo in 2003

The U.S. domestic market component accounts for 93.8% of the total North American market. U.S. domestic cargo tonnage grew 0.8% in 2003 and 1.8% in 2002. The U.S. domestic air cargo market Express Service Dominates the U.S. Air Cargo Market has grown 31.0% over the RTKs, billions past 10 years to 21.0 billion 25 Express carriers Mail revenue tonne-kilometers Charter freight (RTK). Most of the growth Scheduled freight 20 occurred in the express sector. In 2003, the express 15 sector grew 2.1%, following growth of 1.1% in 2002 and 10 a contraction of 10.2% in 2001. Between the period 5 from 1993 to 2003, the express market grew 1975 1979 1983 1987 1991 1995 1999 at an average annual rate of 3.6%. Growth during the first 5 years, from 1993 to 1998, averaged 8.0% per year. In the latter half of the following 5-year period, 1998 to 2003, the express market contracted 0.6%, with much of that contraction occurring during 2001, when the express sector contracted 10.2%. Nevertheless, the express sector continues to be an important part of the U.S. domestic air cargo market, accounting for a 60.9% share of the total U.S. domestic market in 2003, while the more stable scheduled freight sector accounts for 19.3% of the market.
2003
North America
17
Canadian Domestic Air Cargo in 2003

The Canadian domestic market comprised 687 million RTKs in 2003, up from 681 million RTKs in 2002. This represents 0.9% growth for 2003, following 2.9% growth in 2002. Canadas GDP Growth Is a Strong Indicator of Domestic Air Cargo Growth Though gross domestic Growth, percentage product (GDP) is a good 15 Canada GDP growth indicator of national air Domestic Canada air cargo growth cargo growth in most years, 10 Canadian air cargo growth has diverged from GDP in 5 response to the shock of the September 11 terrorist 0 attacks, the subsequent economic uncertainty, 5 and the Iraq war, much as it diverged in response to 1987 1989 1991 1993 1995 1997 1999 2001 2003* the Gulf War in 1991. * 2003 cargo growth estimate However, when the shockinduced uncertainty subsides, air cargo growth should resume its accustomed strong correlation with the GDP. Traffic growth exceeds GDP in most years, in the absence of shocks. However, as competition with trucking increases in the domestic market, this relationship will gradually change.
U.S.-Canada Transborder Air Cargo in 2003

The two-way U.S.-Canada transborder market exceeded 291,000 tonnes in 2003. Northbound traffic contracted 2.6% in 2003, 13.0% in 2002, and 19.7% in 2001. Southbound traffic contracted Northbound Transborder Tonnage Continues to Exceed 0.9% in 2003, 9.8% in 2002, Southbound Tonnage and 31.4% in 2001. Tonnes, thousands Since the late 1980s, U.S. airborne exports to Canada have exceeded exports moving in the opposite direction, from Canada. With implementation of the 1995 Air Transport Agreement, the northbound flow of goods grew, while southbound flows remained relatively flat.
400
Northbound Southbound
300
200
100
1985
1991
1997
2003
18
The greatest share of goods moving northbound by air includes computer subassemblies, documents, and motor vehicle parts. Southbound flows are dominated by telecommunication equipment, documents, and crustaceans
Time-Deferred Services
Time-deferred services, which include 2- and 3-day delivery services, include timedefinite services beyond those delivery periods. Deferred services, which are less expensive than traditional overnight express shipments, appeal to shippers who need to reduce shipping costs but still require time-definite transport. Such lower cost offerings often imply lower yields and profits. The success of air express companies with time-deferred service has attracted other transportation providers, including combination carriers, combinations of transportation providers/brokers and less-than-truckload (LTL) shipping companies. Ground-based logistics companies offer time-deferred services with similar reliability, yet lower cost than traditional air express carriers
Cargo Carriers Use of Trucks Increases

The U.S. transportation landscape continues to evolve, as shippers avail themselves of a wide variety of service types. Combination carriers are using fewer widebody aircraft on domestic passenger services, thus reducing available air cargo capacity. To offset the lost capacity and offer service comparable to that of pure cargo carriers, combination carriers have substituted scheduled truck flights for air connections. Currently, more than 980 Airlines Supplement Available Cargo Capacity With Truck Flights city pairs in the United States and Canada are served by such alternative transport operations. Key to such road feeder service (RFS) growth has been the development of an international air freight pickup and delivery service for U.S. shippers.
YE YEG YY YYC YV YVR YWG YW YQB YHZ YH SE SEA GEG BF BFI YM YMX YO YOW YUL YU PD PDX BT BTM EU EUG BIL BI MFR MF BO BOI SM SMF RNO SFO SF SCK SC OAK SJ SJC FAT FA MRY SLC DEN DE COS CO BT BTV PWM PW PSM PS SY AL SYR ALB BOS PV PVD GRB GR BDL ROC BD RO MSP MS BD BDR SWF SW GRR GR FNT BUF BU MKE MK ELM AVP LGA DTW ER I EL MSN MS BTL CLE BT JFK JF CL YN AB OR ORD YNG ABE EWR EW TT AZ AZO TO MDT PHL TTN TOL CID RFD CA CAK DSM DS PI MDW SBN FWA MD SB FW CMH PIT BWI BW OMA OM ML MLI PKB IAD DCA PK IA DAY DA LN LNK IND PIA PI RIC CVG CV CMI CRW ORF OR LOU ROA RO MC MCI LE LEX ST STL SDF GSO RDU EVV SD EV TRI YYZ ICT JLN JL SGF BN BNA TUL TYS TY CL CLT IL ILM AV AVL CHA GSP CAE CA HS HSV CHS AT ATL BH BHM SAV SA MG MGM JA JAX MO MOB MSY MS PNS PN TP TPA FM FMY LRD LR CRP HRL MFE MF BRO BR MCO BO BOW PBI PB FL FLL MIA LAS LAX ONT ON SAN SA ABQ AB AMA AM LBB DFW TUS ELP ABI AB MAF MA AUS AU SAT SA IAH IA OKC LI LIT MEM ME PHX PH SHV SH JAN JA BT BTR LFT LF
North America
19
Express carriers, too, are incorporating trucks to a greater extent in their operations. With trucking operations of integrators completely deregulated, trucks are commonly used for line haul within Trucking Has Grown Steadily, a 300- to 400-mile radius While Air Cargo Traffic Growth Has Slowed of air hubs. U.S. air cargo traffic, million (tonnes) U.S. domestic trucking traffic, million (tonnes) Regardless of transportation mode, shippers demand that shipments arrive at their destination on time, undamaged, and at a reasonable price. Such market expectations have created opportunity for further competition in the time-critical arena.
9,000
U.S. domestic trucking* U.S. domestic air cargo
12
6,000
3,000
1990
1992
1994
1996
1998
2000
2002
* Figures include for-hire and private carriage Sources: IATA and American Trucking Association LTL carriers have responded by simplifying pricing and adopting technology for both pickup scheduling and customer service improvements. Such competition will be particularly prevalent within the ever-evolving e-commerce marketplace.
20
North America Economy and Forecast

The U.S. component of the North America economy grew 2.5% in 2003, following growth of 2.2% in 2002. The first quarter of 2004 shows U.S. GDP to have grown 3.9%. Growth A Long-Term Perspective Reveals a Return to Accustomed for the second quarter has GDP Growth Rates slowed down. The revised 1996 U.S. dollars 2003 20032013 forecast is 3.8% growth for 20032023 the second quarter. This World is a slight decrease, in comparison to the first quarter. However, it is a United States 1% decline in comparison to the previous forecast. The growth slowdown Canada during the second quarter of 2004 was largely attributable to lower 0.0 1.0 2.0 3.0 Percentage than expected consumer spending and a weak June employment gain. Consumer confidence remains high, and thus consumer spending is expected to increase in the second half of the year. Employment growth is also expected to rebound in the latter half of the year. U.S. GDP forecast for the second half of the year is forecast to be between the 4% to 5% range, with total year-end GDP growth to be 4.6%. U.S. GDP is projected to grow 3.2% during the 10-year period of 2003 through 2013 and 3.0% during the 20-year period of 2003 through 2023. During 2003, the Canadian economy grew 2.0%, following growth of 3.3% in 2002. For 2004, Canadas economy is forecast to grow 2.8%. For the first quarter of 2004, the Canadian economy grew 2.4%. The growth areas for the first quarter were consumer spending and exports. However, as a result of the strong appreciation of the Canadian dollar, the forecast for Canadas exports has been lowered for the remainder of the year. Imports are expected to strengthen. Overall, Canadian GDP is projected to grow 2.9% per year for the 10-year period from 2003 to 2013, and 2.6% for the 20-year period from 2003 to 2023.
4.0
North America
21
North America Air Cargo Forecast

Air cargo traffic in North America grew 0.7% in 2003, following growth of 1.9% in 2002. The market growth for North America has averaged 4.5% per year since 1985. North America air traffic Transborder Air Cargo Traffic Between U.S. and Canada Is Projected is projected to sustain to Grow 6.8% Over the Next 20 Years 4.4% average growth during RTKs, billions the 10-year forecast period High 4 History Forecast Base Average annual and a 4.1% growth rate over Low growth percentage the 20-year period from 20032023 3 2003 to 2023. High 8.5%
Base 6.8% Low 5.1% The transborder market 2 6.5% growth between Canada and the per year United States is projected to grow faster than the 1 domestic markets of either country. Both Canadian and 1993 1998 2003 2008 2013 2018 2023 U.S. industries have expanded business ties under the North American Free Trade Agreement (NAFTA) and the Air Transport Agreement especially at border locations in the Northeastern and Northwestern United States. Bolstering this trend, U.S. shippers use the relatively uncongested and accessible Canadian airports to transport finished and intermediate goods to both Europe and Asia.
Overall, transborder air trade between Canada and the United States is projected to grow approximately 7.5% during the 10-year period of 2003 through 2013, but will average 6.1% over the second half of the 20-year forecast period, from 2013 to 2023.
22
The U.S. domestic sector will continue as the dominant market in North America, comprising slightly more than 93% of total RTKs. Air cargo trade within the United States will display steady growth, averaging 4.3% during the 10-year forecast period and 4.0% over the 20-year forecast period from 2003 to 2023. Growth in the domestic Canadian air cargo market is projected at 3.0% and 2.6% for the 10-year and 20-year time horizons, respectively. Overall, growth in both domestic markets could be limited by the expected expansion of truck shipments in the time-definite sector.
U.S. Domestic Market Will Maintain Steady Growth of 4.0% Over the Forecast Period
RTKs, billions
80 History Forecast Average annual growth percentage 20032023 High 5.1% Base 4.0% Low 2.8% 2.7% growth per year
High Base Low
60
40
20
1993
1998
2003
2008
2013
2018
2023
Domestic Canada Air Cargo Market Will Grow 2.6% for the Forecast Period
RTKs, billions
2.0 History Forecast Average annual growth percentage 20032023 High 3.2% Base 2.6% Low 2.0%
High Base Low
1.5
1.0
0.5
1993
1998
2003
2008
2013
2018
2023
North America
23
Latin America and North America

Trade With America Is Uneven Among Latin America Regions
North America is defined as the United States and Canada. Latin America is defined as South America, Central America (including Mexico), and the Caribbean Basin. The North AmericaLatin America market represents 3% of the worlds air cargo traffic in tonne-kilometers, and 3.6% in pure tonnage. Consistent with recent history, the three regions within Latin America displayed uneven growth during 2003 and 2002. Of the 1.1 million tonnes of cargo transported in 2003, South America Trade With North America Is Distributed Unevenly accounts for 65.3% of Among Latin American Regions air trade, followed by Tonnes, thousands 900 South America Central America with 26.4%, Central America and the Caribbean Basin, Caribbean accounting for the remaining 8.2% of air trade between 600 North America and Latin America. Air trade between North America and Latin America grew by 0.9% in 2003, following growth of 0.7% in 2002, and a contraction of 10.6% in 2001. Northbound air cargo traffic grew 2.5% in 2003 after growing 6.5% in 2002, and contracting 7.1% in 2001. Southbound traffic contracted for year 2003, 2002, and 2001 at 1.7%, 8.1%, and 15.3%, respectively.
300
1981
1986
1991
1996
2001
U.S.- Latin American Air Trade Grew 36.9% In January Through June 2004 Compared With January Through June 2003
Monthly change in air cargo tonnage, year over year, percentage
40
U.S. imports U.S. exports
20
20
Jan 99
Jan 00
Jan 01
Jan 02
Jan 03
Jan 04
25
Air commerce between Central America and North America contracted 6.6% in 2003, following growth of 6.7% in 2002. Mexico remains North Americas most important Central American air trade North American Trade With Latin America Can Be partner, accounting for 54.8% Classified Into Three Subregions of the tonnage that moves South America Central America Caribbean between the two regions. Uruguay, 1% Total air tonnage for Mexico Cuba, 4% Argentina Panama Venezuela * * Nicaragua 6% 4% * 5% 4% contracted 10.5% in 2003, Costa Rica, Peru, ** El Salvador Brazil, 16% 12% following growth of 5.2% 5% Trinidad, 22% Ecuador, Dominican Tobago, in 2002. The effect of the 9% Guatemala, Republic, 13% Mexico, 9% 45% Chile, Jamaica, Colombia, 55% 5% U.S. economic slowdown 22% 12% 25% Honduras Haiti, on Mexicos important 7% maquiladora sector is cited 731,000 tonnes 296,000 tonnes 92,000 tonnes as the primary reason for the * Less than 1% each: Bolivia, French Guiana, * Less than 1% each: Belize * Less than 1% each: Anguilla, Antigua, Barbuda, Guyana, Paraguay, Suriname British Virgin Islands, Cayman Islands, contraction. Over the past Dominica, Guadeloupe, Martinique, Montserrat, St. Lucia, St. Vincent and the Grenadines, few years, the Mexican Turks and Caicos Islands ** Between 1% and 3% each: Aruba, Bahamas, economy has become Barbados, Bermuda, Netherlands Antilles, St Kitts and Nevis more dependent on the U.S. economy. Hence, the Mexican economic recovery will depend, to a great extent, on the U.S. economy. Economic activity arising from maquila manufacturing continues to gain importance in air cargo traffic growth. South American air trade with North America grew 5.6% in 2003, following a contraction of 2.2% in 2002. Air trade for Brazil contracted 3.1% in 2003, whereas air trade for Colombia grew 10.6%, compared to a contraction of 3.5% for Brazil and 1.7% for Colombia in 2002. Chile, North Americas third largest air trading partner in South America in tonnage, saw growth of 3.5% for 2003 after 5.8% growth during 2002. Argentinas air trade grew 21.8% for 2003, following a contraction of 33.7% in 2002. The Argentine economy continues to make a strong recovery. GDP continues to improve with a growth rate of 11.2% for the first quarter of 2004. However, the current energy crisis and recently released first quarter unemployment results could threaten Argentinas strong economic surge. Air trade between North America and the Caribbean Basin contracted 7.5% in 2003, following growth of 2.9% in 2002. Of the larger economies in the region, both the Dominican Republic and Trinidad-Tobago displayed negative growth of 6.8% and 24.3% for 2003, but showed growth of 7.3% and 0.2% for 2002.
26
Air Trade Commodities

A few major items dominate air commerce between the major trading partners. Most air tonnage moves from Latin America to northern markets, with southbound flows representing higher Consumer Goods Dominate North America-Latin America value commodities. Northbound Flows; Packages and Manufacturing Requirements Perishables, apparel, and Dominate Southbound. footwear compose most Northbound Southbound goods moving north. Documents and small packages Documents and small packages Southbound flow includes 9% packages, documents, Automated data 14% Other, processing computers, office machines, 24% Fish, 10% machines Other, 24% telecommunication equipment, 45% 6% Electrical Apparel 9% machinery and industrial equipment. 10% Flowers, 14% Maquila goods represent a Office machine parts 20% 6% Fruits and 5% 4% Motor parts and substantial portion of this traffic. vegetables General industrial Telecom accessories machinery Semifinished products move equipment south to the Caribbean, 721,000 tonnes 399,000 tonnes Central America, and Mexico for final assembly. Upon assembly, the finished goods return to northern markets. Colombian air trade with North America grew 10.6% in 2003, following a contraction of 1.7% in 2002. Colombia is the largest exporter to North America of cut flowers, with vegetables and apparel representing other popular air exports. Apparel, electronic goods, and equipment parts and accessories are common air imports to Colombia. Air trade between Brazil and North America contracted 3.1% in 2003 and 3.5% in 2002. Footwear remains Brazils largest air export (accounting for up to 16.7% of the market), though competitive pressure from Asian manufacturers has affected volumes. Increases in air exports of fish, fresh and dried fruits, and accessories for motor vehicles have, however, partially offset the impact of competition in the footwear market. Exports from Mexico to North America contracted 4.2% in 2003, following growth of 0.7% in 2002. Mexican imports contracted 15.4% in 2003 after growing 9.1% in 2002. Overall air trade between Mexico and North America contracted 10.5% in 2003, following growth of 5.2% in 2002. Fish, insulated wire, and apparel are important commodities shipped to northern centers by air. Parts and accessories for tractors, motor vehicles, and office machinery represent important flows in both the northbound and southbound directions, especially to and from Mexico. This bidirectional flow illustrates how maquila manufacturing affects the composition of goods moving between the two regions.
27
Air commerce between the Caribbean Basin and North America contracted 7.5% in 2003 after growing 2.9% in 2002. Apparel, fresh and dried fruits, and fish are important commodities that are transported northbound. Small packages, dairy products, office machinery, and electrical apparatus represent flows in the southbound direction.
North AmericaLatin America Air Cargo Market Forecast

The regional economies of Latin America are expected to grow moderately over the next 20 years. The combined economies of Central and South America are forecast to grow 4.0% over Trade Between Central America and North America the period 2003 to 2013 Will Grow 6.3% per Year and 4.0% over 2003 to 2023. Tonnes, thousands The Caribbean is projected Northbound History Forecast 800 Southbound Average annual to grow 4.0% over 10 years growth percentage and 3.9% over the period 20032023 600 Northbound 6.5% 2003 to 2023.
Southbound 6.1%
The North America Latin America air cargo market is projected to grow 5.9% per year over the period of 2003 through 2023. Air trade both northbound and southbound is projected to grow at 6.1% and 5.5% per year, respectively, over the forecast period.
400 4.8% growth per year 200 1.9% growth per year 1993 1998 2003 2008 2013 2018 2023
28
The North America Central America air cargo market is expected to be the fastest growing among the regional markets. The market will be led by growth in both Mexico and Costa Rica and will be fueled by manufacturing activity in both countries. Air trade is projected to grow at 6.5% northbound and 6.1% southbound. Such growth is dependent on steady growth in the U.S. economy and a favorable political climate, especially in Mexico. The North America South America market is projected to grow at 6.0% over the next 20 years. Northbound traffic is expected to be stronger, at 6.2%, than southbound traffic, at 5.6% through 2023. Air trade between North America and the Caribbean Basin is expected to grow modestly over the next 20 years, at a projected rate of 2.1% per annum. Traffic growth in the Caribbean Basin will be affected by adoption of political reform in the region.
Trade Between South America and North America Will Grow 6.0% per Year
Tonnes, thousands
2,000 History Forecast Average annual growth percentage 20032023 Northbound 6.2% Southbound 5.6%
1,500
1,000 5.3% growth per year 500 -0.5% growth per year 1993 1998 2003 2008 2013 2018 2023
Trade Between the Caribbean and North America Will Grow 2.1% per Year
Tonnes, thousands
120 History Forecast Average annual growth percentage 20032023 Northbound 2.1% Southbound 2.1%
90
60
30
1993
1998
2003
2008
2013
2018
2023
29
Europe and North America

Market Grew Slightly in 2003 After 2 Years of Decline
For the purposes of this discussion, we define North America as Canada and the United States, whereas Europe will be understood to include all 25 member countries of the European Union (EU), plus Switzerland, Norway, Iceland, Turkey, Romania, Bulgaria, Albania, Gibraltar, and all the countries of the former Yugoslavia. The EuropeNorth America market includes approximately 10.6% of the worlds air cargo traffic in terms of tonne-kilometers, but slightly less in terms of pure tonnage, at 8.0% . Air cargo traffic in the EuropeNorth America market began a very slow recovery in the latter half of 2002. It culminated in distinct spikes as the U.S. West Coast seaport strike in October 2002 delayed Europe-U.S. Air Cargo Ended 2.5% on the Up Side the arrival of U.S. imports After 2 Years of Decline from Asia and diverted some Monthly change in air cargo tonnage year over year, percentage Asian-sourced component 40 Westbound Eastbound imports to European producers. Overall, air trade 20 in this market stagnated for much of 2003 as the economic uncertainty 0 attendant to war and political disputes dampened 20 the business climate. Throughout 2003, a weakening in European Jan 99 Jan 00 Jan 01 Jan 02 Jan 03 Jan 04 economic activity depressed North American air exports, even though a weakening U.S. dollar relative to the Euro should have bolstered trade in this eastbound direction. Similarly, North American air imports from Europe began with strong growth in the first quarter of 2003, but weakened, because of economic uncertainty, until the fourth quarter. However, the first 4 months of 2004 witnessed overall North Atlantic air trade growth of 6.4%, the strongest growth since the first quarter of 2000.
31
For the past three decades, five countries the United Kingdom, Germany, France, Italy, and the Netherlands have accounted for over 70% of all North Atlantic air trade. However, growth in German Five Countries Account for 71% air exports during 2003 of EuropeNorth America Air Trade allowed Germany to surpass Denmark, Finland, Norway, Portugal, Greece, and Iceland the United Kingdom as Turkey, Austria 1% or less each 1.5% each 3% 4% the largest overall European Spain, Sweden, Eastern Europe Germany, 10% 3% each air trade partner with 21% Switzerland, Ireland North America. European 4% each 8% countries that have fostered Belgium and United Kingdom, 4% Luxembourg strong air trade growth in the 21% 8% past 5 years include Ireland, Netherlands Italy, 10% France, Turkey, the Czech Republic, 11% Poland, and Hungary. It should 2.5 million tonnes be noted, however, that the combined countries of Eastern Europe account for only 3.2% of total North Atlantic air trade. The overall EuropeNorth America air cargo market achieved 2.5% growth in 2003, most of which occurred in the last 4 months of the year. Remarkably, this growth came after 11% and 4% declines in 2001 and 2002, respectively. Eastbound traffic (European air imports from North America), which has been weak since 1998, managed 5.1% growth in 2003 after falling 10% and 9.5% in the 2 previous years. Westbound traffic has also been weak since 1999. After falling 11% in 2001, westbound traffic grew only 0.7% in 2002 and 0.6% in 2003. The overall weakness in EuropeNorth America air trade is largely attributable to weak consumer confidence, falling business investment, and recession in the information technology industry, especially during 2000 and 2001. However, other factors may have contributed to this prolonged market lethargy. It appears that Europe and North America have not focused on trading with Exchange Rate Affects the Directionality of North Atlantic Air Trade one another, but have rather Westbound share of total tonnes, percentage Exchange rate index (1980 = 1) focused their trade and 2.0 100 North American exchange rate Westbound share business investment almost exclusively on Asia, to the 1.5 75 detriment of the overall North Atlantic market.
1.0 50
0.5
25
1980
1985
1990
1995
2000
32
Directionality and Exchange Rates

While economic activity, measured by the GDPs of Europe and North America, remains the primary driver of growth in the North Atlantic market, the directionality of transatlantic air trade has historically been influenced by relative exchange rates. The relative strength of the U.S. dollar against a composite of European currencies (of both current EU and non-EU members) correlates well with the westbound percentage of the two-way tonnage total.
North American Air Imports Have Exceeded Air Exports to Europe Since 1996
Tonnes, millions
2.0
Westbound Eastbound
1.5
Average annual growth percentage 19832003 Westbound 6.1% Eastbound 5.8%
1.0
0.5
1983
1988
1993
1998
2003
The rapid strengthening of the dollar between 1980 and 1985 was accompanied by a reversal in directionality, resulting in the westbound direction providing nearly two thirds of the total two-way The Top Five Commodity Groupings in Each Direction tonnage. A subsequent Account for 36% of Directional Flows weakening of the dollar to Documents and small packages Electrical machinery slightly less than the 1980 General industrial machinery level stimulated eastbound Miscellaneous manufactured articles traffic during the early 1990s. Eastbound Westbound
9% Recent research indicates, 13% 7% 6% however, that the importance 10% 6% Other, Other, of exchange rates in this 64% 63% 5% Office 4% Scientific market has diminished machines and 6% 7% and specialized as Europe has pursued computers equipment economic integration. 1,067,000 tonnes 1,428,000 tonnes Individual European governments are now less flexible in promoting trade since adopting the Euro. Consequently, while exchange rates continue to affect North Atlantic air trade, their impact is much less than it was before the late 1990s.
33
EuropeNorth America Air Trade Commodities

A small group of major commodities compose approximately 36% of the air cargo flow between the major trading partners of Europe and North America. In the eastbound direction, express shipments, The North American Economy Will Continue to primarily document and smallExpand Faster Than the European Economy parcel traffic, lead all other Real GDP annual change, percentage 8 History Forecast commodity groupings. North America Europe Electrical machinery, industrial machinery, and office machines follow, in that order. Westbound 4 flows are characterized by general industrial machinery, express packages, electrical 0 machinery, and scientific equipment. Miscellaneous manufactured goods (including work in process 1983 1988 1993 1998 2003 2008 2013 2018 2023 between manufacturing facilities) make up a leading commodity type in both directional flows. Reversing the dramatic market decline in technology goods and industrial machinery during 2001, trade in these leading commodities appears to have stabilized in 2002 and 2003. Moreover, leading commodities not included in the top five surged in 2003. North American exports of fruits and vegetables jumped 67% in 2003. North American imports showed healthy growth as well, with fresh fish imports growing 47%, and pharmaceutical products 26% during the year. The countries of Eastern Europe, particularly those that joined the EU in May 2004, have a very similar commodity mix in their total air trade with North America, in both imports and exports. North American Air Exports to Europe Are Forecast North American air imports to Grow 5.2% per Year from Eastern Europe consist Tonnes, millions 5 History Forecast High mainly of service industry Base Average annual machinery, computing Low growth percentage 4 and office equipment, 20032023 High 6.2% telecommunication equipment, Base 5.2% 3 and semifinished goods. Low 4.2% North American air exports 2.6% growth 2 to Eastern Europe are led per year primarily by documents 1 and small packages and the same commodity types as air imports. 1993 1998 2003 2008 2013 2018
2023
34
EuropeNorth America Air Cargo Market Forecast

Baseline GDP growth rates for Europe and North America will average 2.3% and 2.9% per year, respectively, through 2023. GDP projections of 0.5% below and above the baselines were assessed, and the results of these growth rates are reflected in the low- and high-growth-rate scenarios. The low-growth-rate forecasts assume low capital spending, low foreign direct investment (FDI), and slower European economic integration and economic reforms. The high-growth-rate forecasts assume accelerated capital spending and FDI flows between Europe and North America, continued European economic integration, and substantive European economic reform. Continued growth in both industrial goods and perishables, particularly in the new EU ascension countries of Eastern Europe, are factored into the baseline and high-growth scenarios. A country-by-country forecast was used to capture overall market growth in each direction, while aggregate continent-to-continent flows were modeled in a convergent top-down approach to validate the country-level forecasts. Exchange rates were used in the forecast of each major country pair. Most European currencies were assumed to strengthen approximately 20% with respect to the U.S. dollar for the forecast period. The baseline average annual growth through 2023 is forecast to be 5.2% eastbound and 5.8% westbound, resulting in an overall market growth rate of 5.6% for the forecast period of 2003 to 2023. This forecast growth rate compares well with the historic growth rate of 5.9% for the period of 1983 to 2003. The low-growth models predict average annual rates of 4.2% eastbound and 4.7% westbound. The high-growth scenarios envision average annual growth rates of 6.2% eastbound and 6.9% westbound.
North American Air Imports From Europe Are Forecast to Grow 5.8% per Year
Tonnes, millions
High Base Low
1993
1998
2003
2008
2013
2018
2023
35
Intra-Europe
Regional Overview
For the purposes of this analysis, the intra-Europe region is defined as all 25 member countries of the European Union (EU), plus Switzerland, Norway, Iceland, Turkey, Romania, Bulgaria, Albania, Gibraltar, and all the countries of the former Yugoslavia. The intra-Europe air cargo market comprises approximately 4.2% of the worlds air cargo traffic in tonnage, but because of its geographically compact nature, only 1.0% in tonne-kilometers. Domestic flows within the countries of Europe are not examined in this chapter. Because several leading markets are concentrated in the northern European countries of Germany, the United Kingdom, the Netherlands, and Switzerland, air cargo within the European market is characterized by relatively short lengths of haul, typically between 900 to 1,100 kilometers. As a result of a relaxation of border controls and harmonization of transport regulations within the EU, trucked freight and mail has supplanted much air cargo traffic over the past decade, especially in the last 3 years.
Overall Market Fell During 2 of the Last 3 Years

The intra-European air cargo market contracted 1.2% in 2003, following almost 1.0% growth in 2002 and an 8.8% contraction in 2001. Both scheduled freight and mail traffic, whether carried as revenue Intra-European Air Cargo Market Contracted 1.2% in 2003 cargo by passenger airlines or RTKs, billions by nonexpress air freight 2.0 Express Mail carriers, fell in revenue Scheduled freight tonne-kilometers (RTK) 1.5 for 3 consecutive years, from 2001 through 2003. Scheduled freight fell a 1.0 dramatic 17.5% in 2001, followed by declines of 8.6 0.5 and 3.7% in 2002 and 2003. Mail RTKs declined 6.7% in 2003, after declines of 4.5% 1985 1991 1997 2003 and 5.9% in 2001 and 2002.
Intra-Europe
37
Intra-European air express traffic has displayed uneven growth over the last 3 years, growing 2.2% in 2001, surging 12% in 2002, and then growing only about 1.9% in 2003. During the same period, the overall European Express Carriers Expand Their Market average annual rate of Share During Overall Market Contraction intra-European express Tonnes, millions traffic has fallen. From 1993 1.6 Express Mail to 1998, express traffic grew at Scheduled freight an average annual growth rate 1.2 of 28%, whereas this same market grew considerably slower at 7.1% per year from 0.8 1998 to 2003. While this growth was low by historical 0.4 standards, integrated carriers still managed to grow, despite a relatively adverse air cargo 1993 1995 1997 1999 2001 2003 environment. Integrated carriers now transport 50% of all intra-European air cargo. However, it should be emphasized that much of the tonnage on express carrier networks is not the small-parcel and document traffic traditionally associated with express content. Rather, intra-European express traffic includes significant general freight, used to augment overall freighter airplane loads in traffic lanes where other demand is light. Combination and nonexpress cargo carriers no longer carry the majority of intra-European air cargo. Trucking is now the preferred mode of transport for most freight and mail, even for small-parcel express shipments in short-range markets. Many European flag carriers have retired smaller freighters and/or returned wet-leased lift once used for intra-European air cargo transport. As a result, intra-European air cargo traffic on scheduled European carriers (nonexpress) has contracted 5.2% per year on average since 1998. However, strong growth of 8% for the first half of 2004 bodes well in the short term for this regional trading block. Just as airline express traffic has grown, the number of estimated daily international shipments within Europe has grown, despite a fall in the rate of growth over the last 3 years. This recent deceleration not Traditional Intra-European Express Shipment Growth Has Slowed withstanding, intra-European Estimated daily express shipments, thousands express shipments have 500 grown nearly 13% per year 12.7% from 138,000 shipments growth 400 per year per day in 1993, to 455,000 shipments per day in 2003. 300 Further economic integration in Europe,particularly with the 200 10 countries that ascended to the EU in May 2004, will 100 continue to drive growth.
38
World Air Cargo Forecast 2004/2005 1993 1995 1997 1999 2001 2003
Contracting Freighter Capacity Helps Drive Up Yields

Air cargo traffic within Europe commands high yields, compared with other regional world markets, because much intra-European air cargo traffic is not planned. Rather, it often results from efforts to recover from unforeseen circumstances, such as inventory disruption. Hesitant economic growth and intense competition from express carriers contributed to an overall decline in scheduled freight yields throughout much of the late 1990s. Facing growing competition, the combination carriers responded by expanding freighter services, often using wet-leased freighters. By 2000, combination carriers had shifted more than 20% of their total air cargo traffic to dedicated freighters. This percentage declined to 14.7% by the end of 2003, as many combination carriers found Intra-Europe Scheduled Freight Yield Rebounded pure freighter operations Sharply in 2002 and 2003 unprofitable and returned Annual change, percentage their wet-leased airplanes 20 to the lessors. Further, some national postal 10 services elected to convert much of their airmail services to overnight and deferred 0 trucking services to avoid cost, which led to freighter 10 lease cancellations. As a consequence of taking these freighters out of 1995 1996 1997 1998 1999 2000 2001 2002 2003 service, scheduled air freight capacity began to contract during the second half of 2000. Fuel prices have also contributed to rising yields. During times of jet fuel price volatility, airlines add fuel surcharges to their basic freight rates to compensate for their higher operating costs. During 2002 and much of 2003, fuel prices rose steadily, finally culminating in a peak of $1.18 per gallon in early March 2003. In late 2002 and early 2003, many European scheduled carriers imposed fuel surcharges to cover increased fuel costs. Ultimately, this combination of tightening capacity and rising fuel surcharges forced overall yields to increase. As a result, air freight yields on scheduled carriers actually rose 5.5% in 2002 over 2001 levels, then rose again 11.8% in 2003 over 2002 levels.
Intra-Europe
39
Trucks Provide Complementary Scheduled Freight Services to Aircraft

Air cargo has never been a solely airport-to-airport service. Rather, it is a single component of a transportation infrastructure that links the shipper and consignee. Trucking has the inherent ability to offer door-to-door and factory-to-distributioncenter dockside service, a feature that air transport alone cannot match. Consequently, scheduled airlines that serve the intra-Europe market have long used truck flights, or trucking services registered with their own flight number, as a means of extending their networks Truck Flights Augment Scheduled Airline Capacity and providing additional Over 3,316 weekly air-truck frequencies connecting 328 city pairs were offered scheduling flexibility.
in the Intra-European market as of May 2003
Long-haul European air-truck operations, with 3,316 frequencies per week in May 2003, supplement overall air logistics systems. These air-truck operations provide regularly scheduled freight service for higher value goods or work-in-process between manufacturing facilities, especially to and from Central and Eastern Europe. Scheduled truck operations are often used where demand is too low or infrequent to warrant dedicated freighter aircraft service.
JY JYV OS OSL GL GLA BF PI BFS PIK ABZ NR NRK GO GOT HE HEL AR ARN TL TLL SVO
JK JKG ED EDI AG AGH NC NCL CP CPH LB E BLL BL MM X SN DU LP LBA MM SNN DUB LPL HU HUY MA MAN GD GDN MS MSQ BR BRS EMA NWI AMSBRE HAM HA BR OR EM NW ORK RT EN RTM ENS CW BH CWL BHX ST STN TX TXL DT HA DTM HAJ LH LT LHR LTN PL PLH WA WAW FM OS EI OST EIN FMO LE LEJ DU DUS EX LG SO LI EXT LGW SOULIL DR DRS WRO WR BR MS CG BRUMST CGN BO BOH CD CDG KR LE LEH PR OS PRG OSR KRK SC FR SCN FRA LU LUX UR URO NU NUE QL SXB QLH BR OR ORY ST MU LN BRQ KSC BSL MLH STR MUC LNZ BTS NTE NT ML BT ZR ZRH HOH HO BU BUD GV GVA IN SZ VI INN SZG VIE BR FD BRN FDH LY LYS BOD BO GR GRZ KLU KL BG BGY MX MXP TS VG VGO TSR BIO BI LJ LJU ZA ZAG NCY NC VR VC VRN VCE OT OTP MPL TL TLS MP TR LI TRN LIN BEG VI VIT OP OPO GOA BLQ GO BL ZA ZAZ NCE NC SJJ AOI AO MRS MR MAD MA PSA FLR TL TLN SO SOF LIS LI BCN BC FCO FC VL VLC NAP NA SVQ ALC AL AGP AG LEI
BAK TB TBS EVN
40
Intra-Europe Air Cargo Forecast

The European economy expanded slightly less than 1% in 2003, the slowest year of growth in Europe since 1993. Overall, Europe has only managed 1.8% average annual economic growth Intra-European Air Cargo Traffic Will Average since 2001. In the immediate 5.3% Growth Per Year future, European economic RTKs, billions growth is expected to reach 8 History Forecast High Base nearly 2% during 2004, Average annual Low followed by stronger growth growth percentage 6 20032023 of 2.6% and 2.5% in 2005 High 6.5% and 2006, respectively. Base 5.3% Low 4.2% For the long-term, the 4 4.2% growth baseline GDP growth rate per year for Europe will average 2 2.3% per year through 2023. Inflexible labor markets, an 1993 2003 2008 2013 2018 1998 aging population, expensive pension systems, and slow progress on economic reforms will limit long-term economic growth, especially in northern European countries. In the near term, tight fiscal and monetary policies will continue to curb economic growth and entrepreneurial activity, thereby reining in air cargo growth. On a positive note, stronger growth prospects in the more distant east and south (where longer trucking distances may be unacceptable for some shippers) offer potential air cargo traffic growth prospects for the next two decades. The addition of the 10 new countries to the EU expanded the overall EU population base by nearly 20%, but its current GDP base by only 4%. However, these new additions to the EU will grow nearly twice as fast as established EU countries in both GDP and GDP per capita over the next 20 years, bolstering overall European economic growth. Intra-European air cargo will grow at approximately the rate of the historical trend of the 1990s, with express carriers continuing to expand their market share, albeit at a slower rate than during the 1990s. While surface transport will still provide the bulk of intracontinental high-speed transport for goods, freighter airplane service on express networks will realize relatively strong average annual growth of 4% to 7%. The scheduled combination and traditional air cargo airlines will witness more moderate average growth of 2% to 4% per year during the forecast period. GDP projections of 0.5% below and above the baseline were assessed, and the results of these growth rates are reflected in the low- and high-growth-rate scenarios. Air cargo growth is forecast to range between 4.2% and 6.5%. The baseline forecast envisions 5.3% average annual growth for the forecast period of 2003 through 2023.
2023
Intra-Europe
41
Middle East
Regional Overview
The Middle East region comprises Bahrain, Iran, Iraq, Israel, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia, Syria, the United Arab Emirates (UAE), the West Bank, and Yemen. This region accounts for 5.7% of the worlds air cargo traffic in tonnage and 5.8% in tonne-kilometers. Data from IATA, ICAO, European government and airport statistics, the United Nations, and the U.S. Department of Commerce are used to model air trade flows associated with the Middle East.
Air Trade Overview

International flows moving into, within, and out of the Middle East totaled approximately 1.77 million tonnes in 2003. Based on airport-reported traffic statistics, air cargo in the region is Europe Is the Middle Easts Primary Air Trade Partner estimated to have grown Estimate for 2003 by 10% during 2003 over 2002 levels. Europe North Africa, accounts for 42% of all America, 8% Middle Eastern foreign 11% air trade. This market-share Middle East, Asia, 16% 23% dominance is due to Europes proximity to Europe, the Middle East and 42% to longstanding historical and investment ties.
1.77 million tonnes
Africa, Asia, and North America generate 8%, 23%, and 11% of total regional air trade, respectively. Intraregional air trade among the 14 nations of the region is estimated to total approximately 286,000 tonnes. It should be noted, however, that many airports in the Middle East region act as conduits for sea-air traffic originating from Southwest and Southeast Asia. As a result, much of this intraregional traffic is positioning traffic for onward carriage to export markets in Europe and North America. Oil- and petrochemical-related industries drive much of the regions economy. In particular, oil accounts for 30% of gross domestic product (GDP) in the Persian Gulf countries. Consequently, the flow of air cargo into and out of the region is heavily dependent on the price of this single commodity. The average price per barrel of oil went up from $23 to $27 over the course of 2002 and 2003 in response to concern over the then-looming Iraq War. The oil price increase bolstered local government tax revenues and spending throughout the region. This, in conjunction with increased U.S. military activity in the region, helped drive up air cargo imports into the region. Oil prices rose again throughout the first half of 2004, as recovering global demand, particularly in the developing world, drove the price above $40 per barrel. Even though oil prices are expected to moderate into 2005, these higher than expected prices should continue to stimulate regional air cargo traffic growth.
Middle East
43
Europe Is the Leading International Market

Europe is the Middle East regions largest air trade partner. Total annual volume of air trade between these two regions has expanded 30% from 571,000 tonnes in 1993 to more than 744,000 tonnes in Middle East Air Trade With Europe Has Grown 2003. During 2003, air cargo 2.7% per Year Since 1993 traffic between Europe and Tonnes, thousands the Middle East grew 15%, 800 Eastbound Average annual Westbound with the percentage increase growth percentage 19932003 nearly even between the Eastbound 1.5% 600 eastbound and westbound Westbound 4.7% flows. The market between these two regions is slightly 400 imbalanced, as Middle Eastern air imports outnumber exports 200 by nearly 1.5 to 1 in total tonnage. Tonnage traffic in the westbound Middle East1993 1995 1997 1999 2001 to-Europe direction is fortified by a large component of sea-air traffic originating from either Southwest or Southeast Asia. Middle Eastern air imports from Europe consist of telecommunication hardware, pharmaceutical goods, specialized machinery, express documents, computers, apparel, and luxury consumer goods. Air exports from the Middle East to Europe are perishables (particularly fruits and vegetables), apparel, express documents, power-generating machinery, computers, and miscellaneous manufactured items.
2003
44
Air Trade With North America

Middle EastNorth America air cargo traffic has grown 6.1% annually since 1993, driven primarily by Middle East export growth. The market between these two regions has been almost balanced since Middle East Air Trade With North America Has Averaged 1999. The regions leading air 6.1% Growth per Year Since 1993 trade partners with North Tonnes, thousands America are Israel, the UAE, 200 Imports Average annual Exports Saudi Arabia, Kuwait, and growth percentage 19932003 Qatar. In 2003, Middle Imports 4.1% 150 EastNorth America air Exports 9.4% commerce totaled an estimated 189,000 tonnes, 100 which represents a 15.2% increase, following 3.8% 50 growth in 2002. Much of the growth during late 2002 and throughout 2003 was related 1993 1995 1997 1999 2001 2003 to U.S. military activity in the Persian Gulf region. Sea-air transport is a key component of the air cargo tonnage moving from the Middle East to the United States, with apparel as the dominant commodity. Other air exports to North America consist of perishables, express packages, electrical machinery, pharmaceutical goods, and miscellaneous manufactured articles. Middle East air imports consist of express packages, specialized machinery, general industrial machinery, electrical machinery, miscellaneous manufactured items, and specialized scientific equipment.
Middle East
45
Regional Economic Outlook

Oil exports are the driving economic force in this region, and the increase in world oil prices from 2002 through 2004 has greatly benefited this region in both economic and air cargo growth. The Four Leading Economies of the Middle East Together, the nations of Account for 70% of the Regional GDP Saudi Arabia, Israel, Iran, and the UAE currently Lebanon, Iraq, 3% each * constitute about 70% of total Oman, 4% regional economic activity Saudi Arabia, Kuwait, 6% 26% and are expected to remain the economic leaders for the Syria, 8% forecast period. Middle East Israel, UAE, 19% 11% real GDP will grow at an Iran, 14% average annual rate of 3.5%, reaching nearly $1.2 trillion $589 billion, 1996 U.S. dollars by 2023. This optimistic * Countries representing 2% each include Jordan, Qatar, and Other economic outlook for the Middle East is, however, tempered by ongoing political, religious, and ethnic conflict. Economic diversification has been a goal of many countries in the region for the past two decades as they seek ways to reduce their dependence on petroleum. Jordan, the UAE, Saudi Arabia, and The Middle East Economy Is Expected to Expand Bahrain have been diversifying 3.5% per Year Through 2023 into light manufacturing, GDP, U.S. dollars in billions 1,500 History Forecast irrigated farming, trade services, and tourism. Over the medium to long term, the governments of 1,000 3.0% growth the Persian Gulf countries per year 3.5% growth are expected to increase per year industrial investment in order 500 to reduce their dependence on oil exports. The regions fastest growing economies 1993 1998 2003 2008 2013 2018 include Iraq, Jordan, Iran, and Lebanon, which are expected to realize 6.2%, 4.2%, 4.1%, and 3.7% average annual economic growth, respectively, through 2023.
2023
46
Middle EastEurope Air Cargo Traffic Forecast

As Europe is the largest air trade partner for the Middle East, a long-term forecast of this trading bloc is key to understanding the future of all other air cargo flows linked to this region. Growth in this region has been hesitant at best, with sea-air traffic feed from Southwest Asia unable to overcome the directional imbalance into the region. Near-term economic growth for the region is expected to average 4.5 to 5.0% per year through 2006 and, as a result, overall regional air commerce should continue the healthy expansion witnessed in 2003. Base, low, and high models were developed to forecast the Middle EastEurope air cargo market. GDP projections of 0.5% below and above the baseline were assessed, and the results of these growth rates Eastbound Europe-to-Middle East Air Trade Will Average are reflected in the low- and 4.9% Growth per Year Through 2023 high-growth-rate scenarios. Tonnes, thousands Eastbound Europe-toHigh 1,600 History Forecast Base Average annual Middle East flows will average Low growth percentage 4.9% growth per year as 20032023 1,200 High 6.0% infrastructure reconstruction Base 4.9% and development efforts Low 3.8% 1.5% growth continue (particularly in Iraq, 800 per year the UAE, Qatar, and Oman). However, civil unrest and 400 regional violence are likely to temper foreign investment in several countries in the 1993 1998 2003 2008 2013 2018 2023 region, thereby reducing air import growth. Westbound Middle East-to-Europe flows will continue to strengthen in the near term as the European economy recovers. Long-term westbound growth will average 4.4% per year, dependent largely on Westbound Middle East-to-Europe Air Trade Will Average European consumers 4.4% Growth per Year Through 2023 sentiment and their appetites Tonnes, thousands for Southwest Asian-produced 1,200 High History Forecast Base Average annual apparel and perishables. Low growth percentage In the near and medium term, 20032023 900 reprocessed regional goods High 5.6% Base 4.4% from Southwest Asia, Low 3.3% 4.7% growth Southeast Asia, Central Asia, 600 per year and even Eastern Africa will continue to provide the bulk 300 of air trade in this directional flow. Local or organic traffic may play a more significant role 1993 1998 2003 2008 2013 2018 2023 in this trade lane, but only in the second decade of this long-term forecast.
Middle East
47
Africa
Regional Overview
The Africa region comprises all nations on the African continent, as well as the nations of Madagascar, Sao Tome and Principe, Cape Verde, the Seychelles, Reunion, Mauritius, and the Comoros Islands. Europe Is Africas Primary Air Trade Partner This region accounts for Estimate for 2003 approximately 3.4% of Intraregional Africa North America the worlds air cargo traffic Asia in tonnage and 4.4% in 8% 6% 3% tonne-kilometers. Data Middle East, 12% from IATA, ICAO, European Latin America, 1% government and airport statistics, the United Nations, Europe, 70% and the U.S. Department of Commerce are used to model air trade flows 1,101,000 tonnes associated with Africa. African air commerce was essentially flat during 2003. Total international air cargo flows moving into, within, and out of Africa totaled approximately 1.1 million tonnes in 2003. Europe accounts for 70% of all African foreign air trade. This dominant market share is due to Europes proximity to Africa and longstanding historical and investment ties, many of which date from the colonial era. In addition to these international flows, domestic flows within Africa now total about 102,000 tonnes annually, primarily in the larger nations of South Africa, Nigeria, Algeria, and Egypt. The Middle East, North America, and Asia provide 12%, 8%, and 3% of total regional air trade, respectively. Intraregional air trade among the 56 nations of the Africa region is estimated to total approximately 67,000 tonnes. The dominant economies of Egypt, Algeria, and Morocco in the northern part of the continent; Kenya in the eastern portion; Nigeria in the west; and South Africa in the south tend to command the largest shares of overall African air trade. In general, African air exports tend to be dominated by perishables and apparel to Europe and the Middle East, while air imports into the region tend to be industrial machinery, computers and telecommunication goods, oil and gas exploration/ extraction equipment, and pharmaceutical goods.
Africa
49
Europe Is the Leading International Market

Europe is Africas largest air trade partner. The total annual volume of air trade in this regional market has expanded at an average annual rate of 4%, from 519,000 tonnes in 1993 to more than 768,000 African Air Trade With Europe Has Grown tonnes in 2003. While this 4.0% per Year Since 1993 Tonnes, thousands region once enjoyed parity 600 Exports between northbound and Average annual Imports growth percentage southbound tonnages, 19932003 the market between these Exports 5.7% Imports 2.2% two regions is now slightly 400 imbalanced, as African air exports exceed air imports in total tonnage by a ratio 200 of approximately 4 to 3. African air exports, especially perishables, have made 1997 1993 1995 1999 2001 significant inroads into European markets since the mid-1990s. African air exports to Europe consist primarily of perishables (notably fruits, vegetables, cut flowers, and fish), apparel and footwear, textiles, and industrial chemicals. African air imports from Europe consist of specialty manufactured goods, computers, telecommunication hardware, general industrial machinery, pharmaceutical goods, transportation equipment, and spare parts.
2003

AfricaNorth American air trade has grown 8% annually since 1993, primarily as a result of strong African export growth. The market between these two regions was imbalanced historically, but growth over the African Air Trade With North America Has Averaged past 2 years has brought 8.0% Growth per Year Since 1993 tonnage flows to near parity. Tonnes, thousands In 2003, AfricaNorth America 90 Exports Average annual Imports air commerce totaled 92,000 growth percentage 19932003 tonnes. The total market grew Exports 13.0% 9% in 2003, as African air Imports 5.2% 60 imports from North America surged nearly 16%, and African exports barely grew at 2%.
30
1993
1995
1997
1999
2001
2003
50
Air exports to North America consist of apparel, express documents, fish, fertilizers, textiles, miscellaneous manufactured articles, and electrical machinery. In 2003, apparel comprised more than 75% of Africas Regional GDP one half of the total African Is Controlled by 10 Nations air export tonnage to North America. African air imports consist of specialized machinery, Other, South Africa, 23% 26% express documents, general industrial machinery, * computers, and miscellaneous Egypt, 15% 4% manufactured items.
Tunisia Morocco 6% 7% Nigeria Algeria, 9%
$682 billion, 1996 U.S. dollars

* Countries representing 2% each include Cameroon, Cote DIvoire, Kenya, Reunion, and Sudan
Within the continent of Africa, most economic activity is concentrated in a relatively small number of nations. For much of the past decade, most nations of this region have attempted to implement policies for long-term economic growth and poverty reduction. These policies include improved fiscal discipline and economic diversification away from commodity-based exports. However, regional conflicts, interethnic violence, and drought and other natural disasters have taken a severe toll on many nations economic development efforts. The AIDS/HIV pandemic is a long-term source of concern for the continent, and for the sub-Saharan region in particular. On a positive note, in late 2003, the world welcomed news of Libyas renouncement of weapons of mass destruction and terror, paving the way for its reintegration into the world economy. Much of the economic activity of the Africa region is dependent on oil and agricultural commodity prices. Recent increases in world commodity prices, both oil- and agriculture-related, have improved the export earnings for several countries. The net-oil-exporting nations of Algeria, Nigeria, Angola, Equatorial Guinea, and Gabon have all benefited from improved prices. As a result of continued higher than expected oil prices, several countries have stepped up fiscal expenditures on infrastructure projects in anticipation of higher tax collections on oil export revenues. In contrast with their neighbors near-total dependency on commodity exports, Morocco, Tunisia, and Egypt have benefited from diversification into tourism and light manufacturing.
Africa
51
South Africa, the largest economy on the continent, should rebound economically in 2004 and 2005 after disappointing economic growth of 1.9% during 2003. Economic growth, however, The African Economy Is Expected to Expand Nearly will be held somewhat 4.0% per Year Through 2023 in check by the relatively GDP, U.S. dollars in billions high-value rand, making 1,600 History Forecast South African manufactured exports less competitive 1,200 in international markets. Conversely, the strong 3.2% growth per year South African currency should 800 3.9% growth bode well for higher value per year imports in the medium term.
400
Aggregate African GDP growth averaged 3.2% 1993 1998 2003 2008 2013 2018 per year from 1993 through 2003. The current forecast anticipates average annual growth of 3.9% per year through 2023. Of the larger economies of the region, Sudan, Algeria, and Egypt will experience the fastest growth, expanding at average annual rates of 4.9%, 4.8% and 4.5%, respectively, during the forecast period. In sub-Saharan Africa, the fastest growing economies will include Mozambique, Nigeria, and Angola, each growing at an average annual rate of 5.7%, 4.4%, and 4.2%, respectively.
2023
52
Africa-Europe Air Cargo Traffic Forecast

As Europe is the largest air trade partner for Africa, a long-term forecast of this regional trade bloc is key to understanding the future of all other air cargo flows linked to this region. African Southbound Europe-to-Africa Air Trade Will Average air exports of perishables 5.1% Growth per Year Through 2023 and apparel has propelled Tonnes, thousands northbound air trade High 1,200 History Forecast Base Average annual growth to an average Low growth percentage annual growth rate of 20032023 900 5.7% since 1993. African High 5.9% Base 5.1% air imports from Europe Low 4.3% barely grew during the 1990s, 600 2.2% growth per year but, beginning in 1999, southbound air trade into 300 Africa has grown at an average annual rate of 5.4%.
1993 1998 2003 2008 2013 2018 Base, low, and high models were developed to forecast the Africa-Europe air cargo market. GDP projections of 0.5% below and above the baseline were assessed, and the results of these growth rates are reflected in the low- and high-growth-rate scenarios. Southbound Europe-to-Africa flows will average 5.1% growth per year during the forecast period. This baseline scenario assumes diminishing ethnic and regional conflicts, as well as lasting democratization and poverty-reduction efforts in several countries of the region. 2023
After expanding 5.7% per year for the past decade, northbound Africa-to-Europe flows will continue to grow at an average annual rate of 5.3% as markets for African perishables and apparel Northbound Africa-to-Europe Air Trade Will Average continue to grow. In the 5.3% Growth per Year Through 2023 medium to long term, Tonnes, thousands the eastward expansion High 1,600 History Forecast Base Average annual of the European Union will Low growth percentage facilitate expansion of the 20032023 1,200 market for African goods, High 6.6% Base 5.3% further fueling growth. Low 3.9%
800 5.7% growth per year
400
1993
1998
2003
2008
2013
2018
2023
Africa
53
Asia and North America

Market Grew Slightly in 2003
North America is defined as Canada and the United States, while Asia is defined as Japan, China, Hong Kong, Taiwan, Singapore, Thailand, the Malaysia, Philippines, Indonesia, South Korea, U.S.Asia Air Trade Grew 17.6% From January Through June 2004 Australia, and New Zealand. Compared to January Through June 2003 The North AmericaAsia Monthly change in air cargo tonnage year over year, percentage market represents 20.5% 60 Imports Exports of the worlds air cargo in tonne-kilometers and 40 8.6% tonnage. The U.S.-Asia market, which accounts for 93.7% of the transpacific air cargo tonnage, grew 0.4% in 2003. This compares with the 16.6% market growth reported in 2002, when China, Hong Kong, Thailand, Malaysia, the Philippines, and Indonesia reported double-digit growth.
20
20
Jan 99
Jan 00
Jan 01
Jan 02
Jan 03
Jan 04
The months of September through November 2002 were characterized by an abnormal spike in diverted maritime traffic, as a result of the port strike on the U.S. West Coast. Lasting 12 days in early Transpacific Air Freight Markets Grew Slightly in 2003 October 2002, the strike Growth, percentage drove monthly air cargo traffic 40 Year 2002 Year 2003 to its highest recorded level. This traffic spike skews year 2003 traffic levels 20 unfavorably in comparison to year 2002 traffic.
0
Japan China
Hong Kong Taiwan
Singapore Thailand
Malaysia
Indonesia Korea
Australia New Zealand
Philippines
55
The AsiaNorth America westbound airfreight market saw 1.1 million tonnes of cargo transported, which represents growth of 6.2% for year 2003, following 2.0% growth in 2002 and Japan and China Account for Over 50% a 4.1% contraction in 2001. of the Transpacific Air Cargo Market Eastbound air cargo traffic Australia/New Zealand accounted for 1.6 million 5% tonnes in 2003, a contraction Korea, Indonesia, 2% 8% Philippines, 2% of 1.8% after growth of 24.2% Japan, 26% Malaysia, 5% in 2002 and a contraction Thailand, 4% of 17.1% in 2001.
Singapore, 6% China, Japan and China account Taiwan, 25% 10% Hong for more than 50% of the Kong, 7% transpacific air cargo tonnage. Japan remains the largest 2.7 million tonnes market in Asia, but its market share continues to decline, dropping from 33.9% in 1983 to 32.0% in 1993 and 25.8% in 2003. Japans decline can be attributed in part to Chinas continuing strong growth, with its market presence increasing from a 2.1% share in 1983 to an 11.7% share in 1993 and a 25.2% share in 2003. The recent China-U.S. bilateral agreement further ensures continuing strong growth for Chinas air cargo market.
Investment in transportation infrastructure has increased Asias ability to accommodate air cargo growth. Infrastructure improvements are allowing the region to take advantage both of trends toward global commerce and of the manufacturing capabilities of Southeast Asia, South Korea, and Japan. New airport facilities in China, Korea, and Malaysia and improved facilities at Hong Kong increase the regions capacity to handle freight.
56
Transpacific Air Trade Directionality

Total air tonnage on transpacific routes is determined by a combination of economic activity in North America and Asia, international trade patterns, and commodity mix. The directionality of the tonnage flow, on the other hand, is determined primarily by economic growth in the importing region. Continuing air trade imbalances are producing directional load factor extremes. Longer term exchange rate predictions anticipate a weakening U.S. dollar, which should ease the eastboundwestbound imbalance. The exchange rate, which affects the price of imported goods in local currencies, also influences directionality. A strengthening U.S. dollar increases eastbound traffic, whereas a weakening dollar increases westbound movement.
North AmericaAsia Air Trade Remains Imbalanced
Airborne trade, tonnes, millions
2.0
Eastbound Westbound
1.5
Average annual growth percentage 19812003 Eastbound 8.8% Westbound 9.0%
1.0
0.5
1981
1986
1991
1996
2001
Transpacific Trade Flow Directionality Is Affected by Exchange Rate

Exchange rate index (1991 = 1)
1.6
Eastbound share of total tonnes, percentage

Eastbound share North American exchange rate
0.8
1.4
0.7
1.2
0.6
1.0
0.5
1981
1986
1991
1996
2001
To illustrate, the U.S. dollar dropped nearly 23% with respect to Pacific Rim currencies between 1984 and 1989. Average annual eastbound traffic grew at a lackluster pace of 2.6%, compared with westbound traffic growth of 21.7%. Conversely, since 1995 the U.S. dollar has gained more than 25% against Asian currencies, paralleled by eastbound traffic share, which rose from 49.7% in 1995 to 60.6% in 2003.
57
High-Value Commodities Expand the Market

Two key factors contributing to transpacific market growth are increased commodity value and export content of manufactured goods. The air cargo market consists primarily of commodities Consumer Goods Dominate Transpacific Eastbound Flows; valued at US$16 per kilogram Packages and Manufacturing Requirements Dominate or more. Commodities in Transpacific Westbound Flows this category historically Electrical machinery Office machines and computers account for more than Miscellaneous manufactured articles 50% of all airborne traffic.
Eastbound Westbound
Directional flows in the Documents and 12% 18% small packages AsiaNorth America market 8% Other, vary considerably in terms Fruits and 36% Other, 6% vegetables 13% of the diversity of leading 64% 5% Chemical commodity types. In the 5% materials 13% Apparel 9% eastbound direction, 11% the top five commodity Telecom equipment categories account for 1,621,000 tonnes 1,054,000 tonnes 63.2% of the air cargo traffic. These commodity categories include office machines and computers, apparel, telecom equipment, electrical machinery, and miscellaneous manufactured articles. In the westbound direction, the top five commodity categories account for only 36.7% of the air cargo traffic. Those categories include such items as documents and small packages, electrical machinery, and fruits and vegetables. Asian exports of office machines and computers declined 4.2%, apparel declined 15.1%, and telecom equipment grew 32.4% for 2003. For 2002, however, the same Asian exports grew 19.5%, 48.0%, and 30.7%, respectively. U.S. exports of documents and small packages, electrical machinery, and fruits and vegetables grew 4.7%, 7.0%, and 4.0%, respectively, in 2003. For 2002, the same U.S. exports grew 4.0%, 7.7%, and 0.6%, respectively.
Asian GDP Growth Continues to Lead

Gross domestic product (GDP) measures economic activity and represents the most important determinant of air trade. Growth in air trade has historically exceeded GDP growth and is expected to continue to do so over the next 20 years.
58
GDP for the 12 countries in the transpacific market will grow at 3.3% per year over the next 20 years. The more mature economies of North America are expected to grow at 2.9% per year. China will continue to play a major role in Asia with its membership in the World Trade Organization (WTO), the recent U.S-China bilateral agreement, and its expected GDP growth of 5.8% per year over the next 20 years. Japan will grow at a much slower rate, approximately 1.7% per year. Overall, Southeast Asia will grow at 4.4% per year, representing an important segment of the global market.
Balanced Growth Over the Next 20 Years

The forecast for eastbound trade (Asia to North America) and westbound trade (North America to Asia) is forecast to average 7.2% per year over the next 20 years. The eastbound growth rate is forecast to be 7.2% per year, with westbound growth slightly higher at 7.3% per year over the 20032023 time period. These results reflect both continued economic growth in Asia and slower growth in North America. The eastbound forecast includes two exchangerate scenarios. A low-growth scenario assumes that the U.S. dollar will weaken by 0.5% per year, while a highgrowth scenario assumes a 0.5% annual increase in the dollars strength.
Asia-to-North America Traffic Will Grow 7.2% per Year
8 History Forecast Average annual growth percentage 20032023 High 7.4% Base 7.2% Low 6.8% 7.7% growth per year
High Base Low
1993
1998
2003
2008
2013
2018
2023
North America-to-Asia Traffic Will Grow 7.3% per Year

High Base Low
The westbound model includes the same exchangerate scenarios. However, for westbound flows, a strong U.S. dollar decreases trade, while a weak dollar increases trade.
1993
1998
2003
2008
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Europe and Asia

Regional Overview
The Europe-Asia market comprises approximately 18% of the worlds air cargo traffic in tonne-kilometers and about 9.3% in tonnage. Europe is defined as all 25 member countries of the European Union (EU), plus Switzerland, Norway, Iceland, Turkey, Romania, Bulgaria, Albania, Gibraltar, and all the countries of the former Yugoslavia. Asia is defined as most nations on the eastern Pacific Rim, which includes Japan, China (including Hong Kong and Macau), Taiwan, Korea, Singapore, the Philippines, Indonesia, Malaysia, Thailand, New Zealand and Australia. The regional air trade bloc of Asia and Europe is led by the economic might of the worlds second and third largest economies Japan and Germany. Both countries have struggled to achieve sustained economic growth since the early 1990s, but for different reasons. Japan has grappled with a troubled banking sector and other lingering structural economic problems. Germany has only recently begun to address its pension and welfare system demands. During year 2003, economic growth was slightly negative for Germany and about 2.4% for Japan. However, in late 2003 and early 2004, net exports helped to boost both economies above forecast levels, with Japan seeing additional resurgent growth due to domestic demand.
Air Cargo Traffic Growth Remains Strong

Since 1983, Europe-Asia air cargo traffic has averaged nearly 9.8% growth per year, and nearly 9% per year since 1993. After falling approximately 3% in year 2001, this market averaged 7% growth Europe-Asia Air Cargo Traffic Has Grown in 2002 and 2003. The Nearly 10% per Year Since 1983 Europe-Asia annual growth Tonnes, millions chart shows overall air traffic 3.0 flows between Europe and Asia (which contain some sixth-freedom traffic that 2.0 flows outbound to other regions or inbound from other regions). It does not, 1.0 however, represent the actual trade flows by direction. Therefore, comparisons should not be made between 1983 1988 1993 1998 2003 the chart and the following air trade flow analysis.
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Over the last decade, European air imports of Asian goods, or westbound flows, have grown 11.7% per year while European air exports, or eastbound flows, have seen 5.1% growth. During the early European Air Imports From Asia 1990s, European imports fell Have Driven Overall Market Growth Since 1996 as the recession that followed Tonnes, millions 3.0 Westbound the 1991 Gulf War took a Average annual Eastbound growth percentage heavy toll on growth in 19932003 the European economy. Westbound 11.7% At the same time, Asian Eastbound 5.1% 2.0 demand for European goods increased dramatically and, for a period of almost 4 years, 1.0 eastbound flows exceeded westbound flows. In 1997 and 1998, the 1993 1995 1997 1999 2001 Asian economic crisis severely curtailed economic growth in many countries of the region, leading to an 11% fall in air imports from Europe. The eastbound flow recovered from its drop the following year, and both westbound and eastbound flows surged during 2000. During the technology recession of 2001, European air imports fell 13% as several large European economies slowed throughout the latter half of the year. Both directions of trade recovered in 2002, but during the first half of 2003, the severe acute respiratory syndrome (SARS) scare in Asia severely dampened air imports from Europe. Eastbound trade began to recover steadily toward the end of the year. Since 1998, most air trade growth within this air trade bloc has been generated by Asian air exports moving into Europe.
2003
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Europe-Asia Air Trade Commodities

Directional flows in the Europe-Asia market vary considerably in the leading commodity types. Generally, eastbound commodity flows are more varied than those moving west into Asia-Europe Eastbound Flows Are More Diverse Europe. In the eastbound Than Westbound Flows direction, five commodity Documents and small packages Electrical machinery categories account for General industry machinery Miscellaneous manufactured articles 38% of air cargo traffic. In descending order, Eastbound Westbound these are miscellaneous 7% 9% 6% manufactured goods 10% 7% (including work-in-process 11% Other Other 48% 11% between manufacturing 62% facilities), express packages, 14% 5% Apparel Nonperishable 10% consumer goods general industrial machinery, Office machines and computers electrical machinery, and 1,157,000 tonnes 1,718,000 tonnes nonperishable consumer goods (cosmetics and toiletry items). In the westbound direction, the top five commodity groupings, comprising apparel, various manufactured goods, office machines and computers, electrical machinery, and express packages account for approximately 52% of air trade. One particularly fast-growing segment of Europe-Asia air trade has been small packages and documents, sometimes referred to as traditional express traffic. This type of trade flow has averaged 10% average annual growth in daily shipment counts since 1993, as movement of business samples, legal documents, and other expedited small batch items between Europe and Asia has increased. The market averaged nearly 179,000 shipments per day (sum of both directions) in midyear 2003.
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63
Economic Outlook
Economic growth was just returning to the region after the global economic slowdown of 2001 and 2002, when Asian economic growth was dampened by uncertainty associated with the Iraq War and the SARS Long-Term Asian Economic Growth scare, particularly during the Will Continue to Outpace That of Europe second quarter of 2003. Real GDP annual change, percentage Ultimately, regionwide growth 8 History Forecast Asia Europe averaged 2.7% during 2002 and 3.2% during 2003. Economic growth has been 4 resurgent in Asia during 2004, which will help buoy overall air trade growth. Japan is 0 expected to achieve more than 4% annual growth in 2004 for the first time since 1990. During the forecast period, 1983 1988 1993 1998 2003 2008 2013 2018 2023 China is expected to achieve gross domestic product (GDP) growth of 5.8% per year. Japan will grow at a much slower annual rate of approximately 1.7% per year. Southeast Asia will grow at 4.4% per year. Overall, Asia is expected grow at an average annual rate of 3.3 % for the forecast period 2003 to 2023. More modest economic growth is expected in Europe. After achieving relatively strong growth of 3.7% regionwide in 2000, average annual growth has continually hovered around 1.8%. Germany, France, and the United Kingdom will expand at annual average growth rates of 1.8%, 2.0%, and 2.4%, respectively, for the forecast period. The addition of the 10 new EU accession states, while adding only 4% additional current GDP to the European Union, will still boost overall European economic growth for the next two decades. Over the long term, Europe is forecast to grow on average 2.3% per year for the forecast period.
Japanese Investment in Europe Continues to Outpace Asia

Foreign direct investment often leads to increased trade activity between the source and host countries of the capital flow. Japanese investment in Europe surged in 1999 and 2000, only to fall 30% in 2001 and then rebound by nearly 40% in 2002.
A Surge in Japanese Investment in Europe Has Bolstered Overall Regional Traffic
Japanese investment inflows, U.S. dollars in billions
30
Europe Asia
20
10
64
1989
1991
1993
1995
1997
1999
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2003
With the advent of the common European currency and a consumer market of over 530 million people, Japanese companies invested heavily in several industries (especially the food processing and consumer goods industries) in order to take advantage of anticipated growth. These capital flows have helped to sustain overall Asian air trade with Europe in recent years.
Europe-Asia Air Cargo Market Forecast

Despite periodic crises and recessions, the Europe-Asia air cargo market still grew 8.9% from 1993 to 2003. With the economic outlooks of both regions strengthening over the next 2 years, air trade Eastbound Europe-to-Asia Air Trade Will Average growth should continue its 6.8% Growth per Year Through 2023 rapid expansion of 2003 Tonnes, millions and 2004 into 2005. High 6 History Forecast
Low Base, low, and high models growth percentage 20032023 were developed to forecast High 7.7% 4 the Europe-Asia air cargo Base 6.8% Low 5.6% market. GDP projections of 5.1% growth per year 0.5% below and above the baseline were assessed, 2 and the results of these growth rates are reflected in the low- and high-growth1993 1998 2003 2008 2013 2018 2023 rate scenarios. Eastbound Europe-to-Asia flows will average 6.8% growth, especially as China continues to open its markets in accordance with World Trade Organization (WTO) guidelines. Several hundred million people in Asia will become moderately affluent, and it is expected that they will eventually demand increasing quantities of European goods.
Average annual
Base
Westbound Asia-to-Europe flows will grow slightly slower than the eastbound flows, with long-term growth averaging 6.7% during the forecast period. Continued investment and government spending on infrastructure improvements in southern and eastern European countries will help bolster Asian imports related to technology and light industry.
Westbound Asia-to-Europe Air Trade Will Average 6.7% per Year Through 2023
Tonnes, millions
High Base Low
8 11.7% growth per year 4
1993
1998
2003
2008
2013
2018
2023
Europe and Asia
65
Intra-Asia
Regional Overview
The intra-Asia region comprises nearly all nations on the eastern Pacific Rim, including Japan, China (including Hong Kong and Macau), Taiwan, Korea, Singapore, the Philippines, Indonesia, Malaysia, Thailand, New Zealand, and Australia. The intra-Asia air cargo market constitutes 15.4% of the worlds air cargo traffic in tonnage, and about 7.6% in tonne-kilometers. Domestic flows within the countries of Asia are not examined in this chapter. However, the domestic Japanese market now totals approximately one million tonnes annually. The domestic Chinese market is analyzed in the Domestic China chapter of this document. The less dynamic Japanese market is not analyzed in detail, but its historic and future growth is included in the high-level analysis provided in the World Overview chapter.
Intra-Asia Grew in 2003

A large proportion of intra-Asia traffic is semimanufactured components for further export to Europe and North America. In 2003, the intra-Asia air cargo market grew 6.7%, following growth Intra-Asian Air Cargo Growth Is Resilient of 15.4% in 2002 and a Tonnes, millions contraction of 6.0% in 5 2001, which resulted 11.0% from a drop in Asian average 4 annual manufacturing growth exports to Europe per year 3 and North America particularly computing 2 and telecommunications equipment that began 1 in the fourth quarter of 2000 and persisted 1983 1987 1991 1995 1999 2003 throughout 2001.
Intra-Asia
67
Intra-Asia air cargo traffic has grown much faster than air trade in the rest of the world during much of the past two decades. Since 1983, the average annual rate of growth has been 11.0% for the region. Most nations in the region are separated by large expanses of water, so high-speed surface transportation (e.g., trucking and rail) is almost nonexistent. Air cargo will therefore remain an essential part of intra-Asian economic development. Typical items moving by air within the region are computers, telecommunication equipment, semimanufactured goods, and higher value perishables. Air cargo trade within the intra-Asia market is characterized by relatively short lengths of haul, typically around 2,500 kilometers, as several leading markets are concentrated in the dense air-trade corridors connecting The Top 10 Country Pairs Constitute One-Half Japan, Korea, Hong Kong, of the Intra-Asian Market and Singapore. Given that it Top country pairs for intraregional air cargo traffic possesses the regions 1. JapanHong Kong highest per capita income, 3 2. ChinaJapan Japan has been the focus 8 3. KoreaJapan 2 4. TaiwanHong Kong 5 1 for much of intraregional 5. TaiwanJapan 6. SingaporeJapan trade, including industrial 7. MalaysiaJapan 4 8. ChinaKorea 6 goods, consumer goods, 9. SingaporeAustralia 7 10 10. SingaporeHong Kong and perishables. The top 10 country pairs account for one half of the total annual intra-Asian air cargo flow. Market leaders are JapanHong Kong at 9 267,000 tonnes, followed by Japan-China at 231,000 tonnes and Japan-Korea at 228,000 tonnes. Although export trade to North America and Europe has been the main source of Asias growth, the entire region requires air transportation to facilitate production among its integrated, interdependent industries. Supply-chain traffic, consisting of raw materials, components, and subassemblies, moves between manufacturing centers to take advantage of specialization, relative labor costs, and just-in-time inventory management. Growth in intraregional air trade has increasingly been fueled by rising consumer demand, but this component of Asian air cargo has not recently grown as much as export flows.
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Economic Outlook
Asian economic growth was slowed in the first half of 2003, as a result of the Iraq war uncertainty and severe acute respiratory syndrome (SARS). However, by the end of the year, the Pac 12 witnessed economic growth of 3.2% in 2003 and 2.7% in 2002. Leading the way in economic growth is China, with an expected growth of 8.1% in 2004, followed by Korea and Hong Kong at 7.4% and 5.4% by year end. Japan is expected to exceed an annual growth of 4% in 2004 for the first time since 1990. During the course of the forecast period, the Asian economies are projected to grow at an average annual rate of 3.3%. Chinas gross domestic product (GDP) growth is expected to grow China Will Bolster Overall Asian Economic Growth at 5.8% per year, compared Real GDP annual change, percentage with 1.7% for Japan, 2.2% 20 History Forecast China Asia for Europe, and 2.9% for North America North America. As a result, Europe 15 Japan China will buoy overall Asian economic growth 10 for the forecast period. The combined economies of Japan and the Peoples Republic of China (PRC) currently constitute 71% of the overall Asian economy. Japan currently has about a 53% share of the Asian economy. However, the PRC will expand its regional share from 18% to 28% by the end of the forecast period in 2023.
5
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1988
1993
1998
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2008
2013
2018
2023
Asian Economic Power Distribution Is Shifting

Share of regional GDP
2023 2003
Other, 9%* Australia, 6% Indonesia, 3% South Korea, 7% Taiwan, 4% China, 18% Japan, 53% South Korea, 9% Taiwan, 5% China, 28% Australia, 6% Indonesia, 3% Other* 11% Japan, 38%
* Thailand, Hong Kong, Macau, Singapore, Malaysia, Philippines, and New Zealand
Intra-Asia
69
Hong Kong, Taiwan, South Korea, and Singapore constitute a second echelon of economic power within Asia. Over the past two decades, they have shifted their economic focus from low-labor-cost manufacturing into more high-value manufacturing, financial services, or both. Hong Kong is distinguishing itself as a financial gateway for China, and southern China in particular, as it faces increasing competition for air trade services from Guangzhou, Shenzhen, and other Pearl River area airports. The PRC and Southeast Asia form a third tier of economic activity. These nations are basing their economic development on lower cost manufactured exports, using their abundant labor and natural resources. Since Chinas entrance into the World Trade Organization (WTO), the expected reduction of Chinas own trade barriers should provide its neighbors with new air trade opportunities in the medium and long term. As the largest economic power in Asia, Japan still wields considerable influence over intra-Asia air commerce, even in view of the economic malaise that has gripped this nation for the past decade. Structural financial reforms have occurred only at a slow pace, and economic growth of a magnitude last seen in the late 1980s is not expected during the forecast period. This lower Japanese economic growth is captured in the base regional air trade model.
Foreign Direct Investment Drives Infrastructure and Trade Development

Historically, Japanese investment provided a large portion of the development capital in other Asian nations, furthering Asian industrial expansion and integration. However, Japans economic Worldwide Foreign Direct Investment in Asia Fell difficulties have reduced U.S. dollars in billions its importance as a source 200 Rest of Asia of capital for the region. Japan Korea Throughout the 1990s, Hong Kong China 150 foreign direct investment (FDI) into Asia from the United States and Europe 100 has increasingly supplanted Japan as the primary source 50 for development funds.
1990
1994
1998
2002
11-5_Intra-Asia_WACF 2004/2005
70
Worldwide FDI in Asia grew nearly fivefold from 1990 to 2000, only to fall 35% in 2001. But FDI grew slightly to $105 billion in 2002. FDI flows continue to be concentrated in China and Hong Kong, which account for 50% and 13%, respectively, of the FDI share for 2002. As the health of the world economy returns and the developing Asian region grows, the prospect for continued FDI flows to the Asian region remains bright, especially for automotive, electrical, and electronic products.
Intra-Asia Air Cargo Traffic Forecast

The baseline GDP growth rate for all of PAC-12 Asia will average 3.3% per year for the forecast period, reflecting both slower Japanese economic growth and moderating growth in China. In general, rapid Chinese economic growth and the recovery in the North American and European economies should help bolster air trade prospects for the region. The baseline regional air cargo forecast will average 8.5% annual growth through 2023. GDP projections of 0.5% below and above the baseline were assessed, and the results of these growth rates are reflected in the low- and high-growth-rate scenarios. The low-growth-rate Intra-Asia Air Cargo Market Will Grow scenario reflects slowing at 8.5% Over the Next 20 Years Chinese growth in the Tonnes, millions next decade. The highHigh 40 History Forecast Base growth-rate forecast Average annual Low growth percentage assumes vibrant Chinese 20032023 30 growth through 2023. High 10.0%
Base Low 20 8.5% 6.9%
10
1993
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Intra-Asia
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Southwest Asia Regional Overview

The Southwest Asia region (sometimes referred to as the Indian Subcontinent) comprises Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka. This region constitutes approximately 3.4% of the worlds air cargo traffic in tonnage and 3.8% in tonne-kilometers. Data from IATA, ICAO, European government and airport statistics, the United Nations, and the U.S. Department of Commerce are used to model air trade flows associated with Southwest Asia.
Regional Air Trade Overview

Total international air cargo flows moving into, within, and out of Southwest Asia now exceed 1.3 million tonnes annually, with Europe providing 41% of all Southwest Asian foreign air trade. Europe Is Southwest Asias Primary Air Trade Partner The Middle East, Asia, Estimate for 2003 and North America provide Africa,1% 21%, 18%, and 17% of total regional air trade, respectively. North Asia, America, Intraregional air trade among 18% 17% the eight nations of the region is estimated to total Middle East, 21% less than 30,000 tonnes. Europe, 41% However, a large volume of both European and Intraregional, 2% intraregional air trade is 1.34 million tonnes trans-shipped through the Persian Gulf (either totally by air, or by a combination of sea and air modes), which tends to blur the true origin of many regional air cargo flows. With a population of nearly 1.1 billion, a middle class exceeding 200 million people, and a landmass exceeding 3.2 million square kilometers, India has the potential to develop a large domestic air freight market. In 2003, the Indian domestic market was estimated to total 188,000 tonnes. Since 1993, the Indian domestic market has expanded at an average annual growth rate of 10.2%. A large service sector, an ongoing boom in information-technology-related service exports, and overall industrial liberalization and privatization will continue to stimulate domestic air freight growth. Pakistan is the only other sizable domestic air freight market in this region. In 2003, Pakistani domestic air freight flows totaled approximately 37,000 tonnes. Nepal and Bangladesh also have domestic air freight flows, but estimated tonnage for each nation does not exceed 2,000 tonnes annually.
Sothwest Asia
73
Europe Is the Regions Leading International Market

Southwest Asias largest air trade partner is Europe. The total annual volume of air trade in this regional corridor has nearly doubled, from 252,000 tonnes in 1993 to more than 491,000 tonnes in 2003. Southwest Asian Air Trade With Europe Has The market between these Grown 6.9% per Year Since 1993 two regions is imbalanced, Tonnes, thousands with Southwest Asian air 500 Westbound Average annual Eastbound exports outweighing imports growth percentage 19932003 by 2 to 1 in total tonnage. 400 Westbound 6.7% Southwest Asian air imports Eastbound 7.5% from Europe consist of 300 organic chemicals, perishables, specialized 200 and industrial machinery, automobile parts, and 100 electrical machinery. Air exports from 1993 1995 1997 1999 2001 2003 Southwest Asia to Europe are characterized by textiles, apparel, perishables, miscellaneous manufactured articles, and electrical machinery.

Southwest Asian air trade with North America has grown 6.2% annually since 1993. The Southwest AsianNorth American market is imbalanced, with Southwest Asian air exports outweighing imports Growth in Southwest Asian Air Trade With North America by nearly 4 to 1 in overall Has Averaged 6.2% per Year tonnage. In 2003, Southwest Tonnes, thousands AsianNorth American air 250 Exports Average annual Imports commerce totaled an growth percentage 19932003 estimated 202,000 tonnes, 200 Exports 5.2% which represents a 5.2% Imports 11.5% decline from 2002 levels. 150 During 2002, however, air trade volumes surged nearly 100 30% over 2001 levels between these two regions. Southwest 50 Asian air imports consist of express documents, general 1993 1995 1997 1999 2001 industrial and electrical machinery, miscellaneous manufactured items, and computers. Air exports to North America consist of apparel, textiles, express documents, various manufactured items, and pharmaceutical goods.
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2003

India and Pakistan account for 90% of all economic activity within the Southwest Asia region. The economies of Southwest Asia have grown on average 5.7% per year since 1993. For the past India and Pakistan Account for 90% decade, India has averaged of the Regions Economic Activity 6% annual economic growth, while Pakistan, Bangladesh Sri Lanka, 3% Other, 1% Bangladesh, 6% and Sri Lanka have averaged 4.8%, 5.2%, and 4.5%, Pakistan, respectively. As Indian 11% industrial and trade liberalization progressed India, 79% throughout the 1990s, large efficiency gains helped to bolster the countrys economic expansion, with little $712 billion, 1996 U.S. dollars increase in investment rates. Conversely, political turmoil, regional conflicts, high debt levels, natural disasters, and fiscal deficits have all acted to restrain economic expansion in the region. However, ongoing efforts to promote peace, privatize state industries, and reduce trade barriers, particularly in the garment and textile industries, should stimulate economic growth and air Southwest Asias Economy Will Grow trade. Long-term economic Nearly 5% per Year Through 2023 growth is projected to GDP, U.S. dollars in trillions 2.0 History Forecast average 4.9% for the period of 2003 through 2023, with India leading the 1.5 region at 5% average annual economic growth. 5.7% growth 1.0 Bangladesh and Sri Lanka per year 4.9% growth will each average 4.6% per year annual growth for the 0.5 forecast period, and Pakistan will expand at an average rate of 4.1% per year. 1993 2003 2013
2023
Sothwest Asia
75
Foreign direct investment (FDI) has also acted as a stimulus for international air trade in the region. FDI inflows to India grew more than sixfold between 1993 and 1997, and shortly thereafter both Worldwide Foreign Direct Investment export and import growth In Southwest Asia Has Rebounded accelerated. The onset of the Investment inflows, U.S. dollars in billions Asian economic crisis in 6.0 Rest of Southwest Asia Sri Lanka the latter half of 1997 brought Pakistan currency devaluations India throughout Southeast Asia, 4.0 which caused exports from these nations to become more competitive than those 2.0 of Southwest Asia. FDI fell nearly 40% from 1997 to 2000. But by 2002, FDI inflows to the Southwest Asia region 1990 1992 1994 1996 1998 2000 had nearly recovered to their 1997 peak of $5.9 billion, coinciding with a surge in air cargo traffic with North America and Asia.
2002
Southwest AsiaEurope Air Cargo Traffic Forecast

Southwest Asian air trade with Pacific Rim Asia and North America has grown substantially in recent years, but Europe remains Southwest Asias largest air trade partner. The Southwest Eastbound Europe-to-Southwest Asia Air Trade AsiaEurope market Will Average 6.8% Growth per Year Through 2023 achieved nearly 7% average Tonnes, thousands High History Forecast annual tonnage growth from 1,200 Base Average annual 1993 to 2003. Future longLow growth percentage term average annual growth 20032023 900 High 7.6% trends should reflect those Base 6.8% of the past decade. Low 5.9%
600 7.5% growth per year
300
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2023
76
Base, low, and high models were developed to forecast the Southwest AsiaEurope air cargo market. GDP projections of 0.5% below and above the baseline were assessed, and the results of these growth rates are reflected in the low- and highgrowth-rate scenarios. Eastbound Europe-to-Southwest Asia flows will average 6.8% growth per year in the base model. This base model assumes a continuing expansion of the Indian middle class, further privatization of Indian industry, rapprochement between India and Pakistan, peace in Sri Lanka, and ongoing aid to Afghanistan. Westbound Southwest Asia-to-Europe flows will continue to expand, albeit not as fast as Eastbound air trade with Europe. Competition with low-cost producers of goods in China and Southeast Asia Westbound Southwest Asia-to-Europe Air Trade is likely to continue for Will Average 6.1% Growth per Year Through 2023 Southwest Asian producers Tonnes, thousands in European markets. High 1,600 History Forecast Base However, privatization Average annual Low growth percentage should make Indian industry 20032023 1,200 more cost competitive High 7.8% Base 6.1% with its counterparts in Low 4.5% Southeast Asia, which 800 6.7% growth would lead to increased per year purchases of locally 400 produced goods for air export to Europe. In addition, reduction 1993 1998 2003 2008 2013 2018 and/or elimination of garment and textile quotas should stimulate trade in this lane.
2023
Sothwest Asia
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Commonwealth of Independent States

Regional Overview
The Commonwealth of Independent States (CIS) comprises 12 of the 15 republics of the former Soviet Union: the Russian Federation, Ukraine, Moldova, Belarus, Armenia, Azerbaijan, Georgia, Kazakhstan, Uzbekistan, Turkmenistan, Kyrgyzstan, and Tajikistan. The combined domestic and international air cargo flows associated with this region are estimated to generate approximately 2% to 3% of the worlds total air cargo traffic. The regions total air cargo traffic, including both domestic and international flows, is estimated to total 800,000 tonnes for 2003. More than 90% of that total was carried by CIS operators. Approximately 150,000 tonnes of the cargo transported by CIS-based operators is carried for multinational firms and foreign governments as charter services to and from markets not connected to the CIS. Some Russian carriers take advantage of their geographic location to carry traffic on fast-growing routes between Europe and Asia. Russian carriers transport roughly 8,000 to 10,000 tonnes between Europe and Far East Asia, transiting Russia without commercial stops within the country
Air Cargo Traffic Rose Slightly in 2003

Over the past decade, international traffic volumes on CIS-domiciled carriers have grown to lead domestic volumes by a ratio of more than 2 to 1. In 2003, overall CIS air cargo traffic rose 1.6% relative to 2002 levels, after growing almost the same percentage in 2002 over 2001. The weak growth in 2003 traffic was due primarily to changes in nonscheduled Russian carrier traffic tied to Asia.
International Traffic Volume on CIS-Based Carriers Is More Than Double Domestic Traffic
RTKs, billions
2.5
Domestic International
2.0
1.5
1.0
0.5
1993
1995
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CIS and Baltic Nations
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Domestic Russia and intra-CIS air cargo fell 72% during the breakup of the Soviet Union from 1990 to 1992, when activity between former state enterprises fell dramatically. At the same time, international air cargo traffic surged, primarily as a result of strong demand for foreign consumer goods, especially electronics and apparel. During the succeeding 5 years, from 1992 to 1997, CIS international air cargo traffic more than quadrupled. The ruble crisis of August 1998, however, weakened Russian purchasing power, Russian Carriers Lead Air Cargo Traffic in the Region forcing many Russian Tonnes, thousands consumers and businesses Central Asia 1,000 Caucasus Republics to purchase locally produced Ukraine and Moldova Russian Federation goods wherever possible. 800 Unleashing the repressed demand for international 600 trade that resulted from this monetary constraint, 400 coupled with expansion in the mineral and oil industries 200 in several CIS states, has driven a resurgence in 1998 1999 2000 2001 2002 2003 domestic air cargo growth of 11.1% per year since 1998. By comparison, international CIS air cargo traffic has recovered at a much more modest pace of 1% annual growth since 1998. Owing to its geographic size and economic concentration, Russia commands the largest share of regional traffic, its airlines carrying 78% of all tonnage for carriers in this region. Domestic air trade is a vital part of commerce in the geographic expanse of the region, particularly in Russia. The vast distances and relatively underdeveloped surface transportation links, especially in Siberia and the northern regions, necessitate the use of aircraft for the movement of goods and industrial materials. In 2003, Russian airlines transported about 279,000 tonnes on domestic routes. The geographical distribution of Russias air trade may be taken as typical of the entire CIS regions international air commerce. As is the case with Russia, international traffic focuses on Europe and Asia, with intra-CIS routes between the former Soviet republics accounting for only about 25,000 tonnes annually, or about 5% of total international air cargo carried by CIS-domiciled carriers.
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Europe and Asia Predominated International Traffic for Russian-Domiciled Carriers in 2003
Russian carrier traffic includes transit, charter, and foreign military support
Southwest Asia, 6% North America, 6% Middle East, 9% Latin America, 1%
Africa, 7%
Asia, 31% Europe, 35%
CIS, 5%
341,000 tonnes
CIS-Asia traffic, especially that originating in China, has been one of the largest international air trade segments in this region. Russian and CIS demand for consumer electronics and apparel Russia, Uzbekistan, Kazakhstan, and the Ukraine drives demand for air cargo Lead Overall Air Trade With Western Europe services in this market. Until the end of 2002, 80% Other, 7%* of Russian-Chinese air trade Turkmenistan, 4% Azerbaijan, 5% was conducted on Russian charter (nonscheduled) Ukraine, carriers. However, new 8% Russian Federation, Russian and Chinese Kazakhstan, 52% 9% customs regulations Uzbekistan, implemented in 2002 15% and 2003 have reduced volumes by 30% over 138,000 tonnes 2 years in this specific lane. * 2% or less: Moldova, Belarus, Armenia, Georgia, Kyrgyzstan and Tajikistan In particular, the Russian government, through various customs regulations and civil aviation policy revisions, has tried to divert traffic from nonscheduled to scheduled carriers. Europe is the other large market for this region. Total CIS air trade with Europe now exceeds 138,000 tonnes annually, with about 99,000 tonnes imported from Europe by air. Though European air imports to the CIS fell 30% after the 1998 ruble crisis, they have since rebounded and now exceed their pre-crisis levels. CIS air imports consist primarily of luxury consumer goods, apparel, medicines and medical goods, computing and telecommunication equipment, and oil and gas extraction equipment. In contrast to the import picture, CIS airborne exports to Europe have grown nearly 15% per year since 1993, albeit from relatively low levels, and they now total about 39,000 tonnes annually. Apparel, precious metals, scientific instruments, military and aerospace equipment, and chemicals are the main products flown west to Europe.
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Military-Design Freighters Will Remain Essential to Regional Air Trade

Most CIS-related air trade is transported on former Soviet military aircraft, both turboprop and jet-powered. These aircraft are typically rear-ramp loaders, requiring minimal ground support equipment. These loading features are crucial in the more remote regions of the CIS, where airport infrastructure is often lacking. The combined effect of a plentiful supply of used military aircraft, low acquisition costs, and lagging airport infrastructure investment will keep these indigenous aircraft in CIS fleets for the forecast period. There are approximately 460 CIS-built freighters domiciled in the region that are capable of carrying 15 tonnes or more of payload. Of these, about 340 are airworthy and serving civilian markets. Given that their actual utilization is neither high nor widely known, these aircraft are not included in the World Freighter Fleet section of this forecast. However, several factors will contribute to the introduction of more purpose-built civilian freighters into this regions fleets. As of April 1, 2002, most former Soviet military aircraft cannot meet ICAO Chapter 3 noise regulations and CAEP emission regulations. Military aircraft production rates are too low to meet replacement requirements during the forecast period. Military aircraft cannot operate economically enough to compete in the international marketplace. Military aircraft have allowed certain CIS cargo carriers to become the unique providers of outsize transport capacity in world air freight markets. Outsize air cargo is defined as freight that is too large, dimensionally, or too heavy for civilian widebody freighter aircraft. A select group of Russian and Ukrainian carriers, allied in some cases with Western partners, uses very large and medium-size ramp-loading military freighter aircraft to serve this specialized sector, which accounts for nearly 130,000 tonnes of freight annually worldwide. It should be emphasized that most of the outsize cargo traffic does not originate or terminate in the CIS. Most outsize carriers fly charters, transporting industrial shipments between Europe, North America, and Asia. Typical industries served by these carriers include oil and gas extraction, aerospace manufacturing, electrical power generation, and infrastructure development. These carriers have also participated in transporting materiel in support of the U.S. military in the Middle East and Afghanistan.
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CIS-Europe Air Cargo Forecast

The CIS-European air cargo market will grow by an overall average annual growth rate (exports and imports combined) of 6.5% for the next two decades. CIS air imports from Europe are forecast CIS Air Imports From Europe Will Triple to grow at 5.9% per year, Over the Next 20 Years expanding from 99,000 Tonnes, thousands tonnes in 2003 to 312,000 High 400 History Forecast Base tonnes by 2023. Though Average annual Low growth percentage demand for European 20032023 300 consumer goods has High 6.7% Base 5.9% recovered since the Low 5.1% crisis of 1998, European 200 4.4% growth imports remain expensive, per year compared with domestically 100 produced goods and extremely price-competitive Asian goods. Despite the 1993 1998 2003 2008 2013 2018 2023 price differential, European foreign investment, particularly from Germany, accompanied by increasing Russian demand for European consumer products, will drive long-term growth. CIS air exports to Europe will grow at a rate of 7.9%, much faster than imports, reaching nearly 177,000 tonnes by 2023. European industrial demand for CIS-produced apparel, CIS Air Exports to Europe Will Expand specialty chemicals and Quickly From a Small Base metals, specialized scientific Tonnes, thousands equipment, and aerospace High 400 History Forecast Base goods will bolster growth Average annual Low growth percentage for the entire forecast period.
300
Political stability, reduced capital flight, implementation 200 of policy efforts aimed at 15.3% growth per year achieving World Trade Organization (WTO) 100 membership, and an improved foreign 1993 1998 2003 2008 2013 2018 investment climate could foster an export-driven economy for a wide array of manufactured goods. These developments would foster a high-growth scenario for CIS air exports. Conversely, political uncertainty, price competition with Asian manufacturers, and continuing regional conflicts would impede air trade growth, leading to the projection depicted in the low-growth scenario.
20032023 High 11.4% Base 7.9% Low 4.4%
2023
83
Domestic China
Regional Overview
The domestic China region, for the purposes of this forecast, includes the Mainland, or what is commonly referred to as the Peoples Republic of China. The special administrative regions of Hong Kong and Macau are not examined in this chapter. It is estimated that domestic Chinese air cargo traffic currently accounts for 5.3% of the worlds total air cargo traffic by weight, but only about 1.5% of the world market in cargo tonne-kilometers.
Rapid Growth in the 1990s Has Produced a Large Domestic Market

The domestic China air cargo market has grown at an average annual rate of more than 20% since 1991. Throughout the 1990s, China was characterized by strong economic growth, Domestic China Air Cargo Traffic Totals rising foreign investment, More Than 1.6 Million Tonnes Annually and extremely competitive Tonnes of freight and mail, millions Freight labor rates. 1.8
Mail
As a consequence, China has rapidly become the worlds premier manufacturing center. Most of its key industries are geared toward a wide variety of commodities, including computing and telecommunication equipment, and apparel, all of which traditionally tend to be transported by air.
1.4
1.0
0.6
0.2 1991 1995 1999 2003
Because most of these goods are intended for export, China witnessed a tremendous increase in international air trade. Strong air export traffic to Asia, Europe, and North America drives much of Chinas domestic air cargo traffic growth. However, domestic demand in the regions rapidly developing large cities has also become an important driver for growth over the last 5 years.
Domestic China
85
Domestic air cargo growth was comparatively weak for only 1 year during the entire past decade. Growth was approximately 8.8% in 1997, immediately following the Asian economic crisis. During 2003, the domestic China market grew 9.4%, following growth of 17.9% for 2002 and 17.4% for 2001. The weaker growth that was witnessed in 2003, compared with prior years, can be attributed to severe acute respiratory syndrome (SARS). During the SARS epidemic, a significant number of passenger flights were canceled, resulting in a dramatic reduction of belly-hold cargo capacity, which in turn affected domestic air cargo traffic movement. This marks only the second time in the past 12 years that domestic China air cargo market growth failed to exceed 15%. Even with this slightly slower growth, China now has the second largest domestic air cargo market in the world, trailing only the Unites States, at 1.6 million tonnes moved annually.
Domestic China Air Cargo Traffic Has Grown 21.3% per Year Since 1991
RTKs, billions
2.5
Mail Freight
2.0
1.5
Market Activity Is Concentrated Among Coastal and Southern Provinces

The majority of air cargo market activity is concentrated in the coastal and southern provinces, where the bulk of Chinas 1.3 billion people and $1.5 trillion economy are situated. Approximately 34% of all domestic air cargo tonnage can be found in the top 10 city pairs. These city pairs lie in a triangular corridor delineated by the cities of Beijing, Shanghai/Hangzhou, and Guangzhou/Shenzhen.
1.0
0.5
1991
1995
1999
2003
Current China Domestic Air Cargo Traffic Is Concentrated on Coastal and Southern Trade Lanes
Top city pairs for domestic air cargo traffic
7 5 10 6 2 8 4
9 3
1. 2. 3. 4. 5. 6. 7. 8. 9. 10.
BeijingShanghai ShanghaiShenzhen GuangzhouShanghai GuangzhouBeijing BeijingShenzhen KunmingBeijing ChengduBeijing GuangzhouChengdu GuangzhouHangzhou ChengduShanghai
86
The types of goods moving on domestic routes vary by region. Air commodities moving in the southeastern provinces, especially the Pearl River delta region, are apparel, home electronics, and telecommunication equipment and light industrial products. Goods transported from the eastern provinces include textiles, apparel, electronics, and perishable foods and live animals. From the northern regions, apparel and electronics are supplemented by precision instruments. Pharmaceuticals, cashmere, cut flowers, and industrial equipment constitute the bulk of flows originating in the western provinces
Infrastructure Development Will Remain Key to Continued Growth

Investment in the cargo transportation infrastructure, both in airports and potential competing surface modes, will set the pace for domestic air cargo industry growth. From 1996 to 2000, China invested $7.9 billion in airport construction. There are now 145 civil airports in China, with a further 100 airports planned by 2010. Construction of 28 airports is in work, and the remaining 72 are set for construction between 2005 and 2010. More than 27 airports in Chinas western regions are planned in accordance with Chinas 5-year plan and the governments Go West development plan. By 2015, a total of five vertical and seven horizontal national routes will have been completed, potentially opening up new modal competition on time-definite, short-to-medium domestic transport sectors. As the new highway network approaches competition, the availability of surface modes of transport in the region could easily result in diversion of traditional air cargo traffic from airplanes to trucks, as has been witnessed recently in North America and Europe. The government has recently increased investment in the energy, mining, education, and transportation sectors of the western provinces (e.g., Xinjiang, Yunnan). In addition, foreign investment in the western provinces is encouraged through certain guarantees for overseas investors considering projects in Chinas western regions. Increasing investment by the government and incentive programs to attract foreign investors to the west will ultimately drive geographic expansion of the domestic China air cargo network. Growth in economic activity in the western cities, which currently lags that in the eastern cities of Beijing, Shanghai, and Guangzhou, will ultimately contribute to growth in air traffic for the region as a whole.
Domestic China
87
Physical infrastructure development will have to accompany corresponding market developments to ensure strong air cargo traffic growth. Chinas entry into the World Trade Organization (WTO) in September 2001 is easing foreign investor concerns. In fact, in 2002 Chinas foreign direct investment inflows surpassed that of the United States. To date, no real express network comparable with those in the United States and European regional markets has emerged in China. For the past decade, the domestic China market has been served mostly by passenger airplane excess lower-hold cargo capacity, which produces relatively low revenue yields. However, as business-to-business transactions increase between Chinese firms, the development of a China-based integrator or of joint-venture affiliations with a foreign express carrier could stimulate a whole new market segment.
Domestic China Air Cargo Traffic Is Forecast to Expand

For the forecast period of 2003 to 2023, Chinas gross domestic product (GDP) is projected to grow 5.8% per year, on average. Chinas GDP Is Expected to Triple Coupled with predicted GDP, U.S. dollars in billions population growth, 5,000 History Forecast GDP per capita is expected to exceed its 4,000 current level by more than 2.7 times by 2023. 3,000 These growth rates are 8.7% growth slower than the torrid per year 2,000 growth of the 1990s, 5.8% growth reflecting a shift per year 1,000 downward to rates that are more sustainable 1993 1998 2003 2008 2013 2018 over a longer period.
2023
88
Base, low, and high models were developed to forecast the domestic China air cargo market. GDP projections for 0.5% below and 0.5% above the baseline were assessed. The results of these growth rates are reflected in the low- and high-growth-rate scenarios, respectively. Overall air trade within China will grow 10.6% annually for the forecast period, with growth accelerating to its fastest rate in the 2005-to-2008 period. The low-growthrate scenario envisions Domestic China Air Cargo Is Forecast to Grow slowing foreign investment 10.6% per Year for the Next Two Decades and no substantial domestic Tonnes, thousands High 16 History Forecast express market development Base Average annual for the next 5 years. Low growth percentage The high-growth-rate 20032023 12 High 11.6% forecast assumes Base 10.6% accelerating foreign Low 9.5% 8 investment in the near term, 19.5% growth as well as the emergence per year of one or more domestic 4 express carrier networks within China.
1993 1998 2003 2008 2013 2018 2023
Domestic China
89

Fleet Growth Reflects Market Strength
With worldwide air cargo traffic projected to more than triple over the next 20 years, the freighter fleet is projected to nearly double from the current 1,766 to 3,456 airplanes. Efficient widebody freighters will replace aging standard-body freighters, driving a gradual increase in average freighter payload capability of 22% over the 20-year projection period. The widebody fleet will grow from less than 45% to more than 60% of the total air cargo fleet. Freighter efficiency improvements (utilization, load factor, etc.) also tend to keep the fleet growth rate below the projected traffic growth rate. Taking a projected 1,260 aircraft retirements into account along with the fleet growth requirement, a total of 2,950 airplanes will join the freighter fleet by 2023. Three quarters of these Widebody Freighters Dominate the Future Fleet additions will come from conversions, while 724 Standard-body (< 50 tons) Medium widebody (40-65 tons) of the aircraft will be Large (> 65 tons) 2023 new-production freighters. 2003 As a share of the worlds jet fleet, freighters will fall 31% 24% slightly from 11% to about 10% 40% 56% of the total. Freighters of 20% all sizes will provide more 29% than half of the worlds total air cargo capacity, a slight increase from today. 3,456 freighters 1,766 freighters
91
World Freighter Fleet by Category

The projected fleet can be divided into three payload categories: standard-body (less than 50 tons), medium widebody (40 to 65 tons), and large (greater than 65 tons). This forecast does not distinguish between Freighter Fleet Is Grouped Into Size Categories subcategories of standardbody freighters because Standard-body Medium widebody Large (less than 50 tons) (40 to 65 tons) (more than 65 tons) the distribution of the current categories is roughly equal BAe-146 707-320C 767* DC-10-30/40 at the end of the forecast DC-9* DC-8* A300* MD-11 period. Classification of 737* 757-200 A310* 747* production and conversion 727* MD-80/-90 A330* 777* freighters, both existing A320* L-1011 A340* and future, is based on cross-section width DC-10-10 A380* and payload capability. * Represents a series This forecast does not include airplanes dedicated to the outsize cargo market, which is defined dimensionally rather than by weight. Neither does the forecast include the huge fleet of freighters manufactured in the CIS, because it is not possible to assess the condition and utilization of aircraft in that fleet. A discussion of this fleet is, however, included as part of the Commonwealth of Independent States section.
Significant Fleet Trends and Developments

Unique factors (sometimes conflicting) that must be considered in projecting the future freighter fleet include Customer demand for improved services (reliability, timing, ancillary, etc.), as well as increased lower-hold cargo security requirements for passenger airlines, encourages expanded freighter operations in spite of the attractive pricing of lower-hold capacity. Stimulation of new freighter services, as passenger carriers recognize the revenue potential of cargo (which already represents, or soon will come to represent, the major source of revenue for some large Asian operators). Increased emphasis on operating efficiency, spawning commitments throughout the industry to upgrade and expand widebody freighter fleets with new-production and younger converted models. Environmental and regulatory pressures (noise, emissions, and aging), which accelerate evaluation of fleet requirements.
92
Continuing development of competitively priced, expedited surface transport, which tends to concentrate regional air freight growth to a few large express carriers (or surrogates) and to markets where geographical obstacles or lack of ground transport infrastructure favors air transport. Proliferation of widebody passenger airplanes (such as the 777 and A340) that have large lower holds and the ability to fly full payloads on long routes, somewhat offsetting the lag in passenger airplane lower-hold capacity growth. Introduction or study of new-production and conversion freighter models to meet specific market requirements (A380F, 747 Advanced F, 777F, A330F, etc.).
Integrated Top-Down/Bottom-Up Forecast Methodology

An integrated top-down/bottom-up approach is used to build the freighter fleet forecast. This approach requires a thorough analysis and understanding of macro industry trends in air cargo Freighter Fleet Forecast Methodology traffic and freighter capability, as well as detailed regional and operator-specific trends Total cargo World Air Cargo Forecast and strategies. The present Demand Projected traffic and future lower-hold Minus potential of the passenger Lower-hold lift Current Market Outlook fleet is subtracted from total Passenger/combi airplane Supply air cargo traffic demand, forecast after accounting for = Equals passenger baggage. Needed freighter lift Freighter airplane Lower-hold lift for each Supply requirement carrier is determined by region from analysis of the Boeing Current Market Outlook (www.boeing.com/commercial/cmo). Consideration is given to recent developments such as the reduction of available cargo volume that resulted from tightened security requirements and higher passenger load factors. The remainder, representing the difference between total air cargo traffic (demand) and lower-hold capacity (supply), is the required freighter fleet capacity. After defining airplane capability, performance, and availability, the freighter fleet forecast analysis proceeds to the regional domicile level for each airline, taking into account such variables as individual fleet type and age, airplane size, retirements, utilization, load factor, market share, service, and strategies. Maintaining the balance among total air cargo lift, traffic, and availability of passenger aircraft for conversion is the basis of this exhaustive forecast analysis.
93
Freighter Fleet Development

Widebody freighters will rise from less than 45% to more than 60% of the tota l freighter fleet. In light of their higher payloads, it is not surprising that widebody freighters will come to predominate Widebody Freighters Represent even more strongly in Over 90% of Future Fleet Capacity total world fleet capacity. Standard-body (< 50 tons) Medium widebody (40-65 tons) Increased availability of Large (> 65 tons) 2023 widebody conversion 2003 candidates is yet another 8% significant factor driving the 13% 18% increase in the widebody share 14% of the world freighter fleet. 73% Express carriers have been 74% the primary customers for new-production, medium-size widebody freighters, but the 168 billion ATKs 478 billion ATKs availability of conversion candidates will make widebody freighters attractive to general cargo carriers as well. The sustained popularity of production and conversion 747-400 freighters will ensure that the 747F will continue to represent a large proportion of this important category of freighters. To appreciate the impact of size on capacity dominance, consider that by number of aircraft, 747Fs account for only 15% of the worlds air freighter fleet, yet 747Fs provide more than half of the worlds total freighter capacity. Newer models of large freighters, both currently available and proposed, will begin to populate the category in greater numbers toward the middle of the forecast period.
94
Significant increases in the worlds fleet of standard-body freighters should not be overlooked. While its share of fleet capacity declines from 13% to 8% during the forecast period, more than 1,200 units will be added, driving a 40% overall increase for this category. The wide availability of classic 737s and 757 passenger airplanes for conversion creates a preference for these models. In the case of 757s, candidates for conversion are concentrated in the U.S. airline fleet, and their value as passenger airplanes to financially ailing domestic U.S. carriers has forestalled near-term conversion activity. Smaller standard-body models will also serve important niche- and feedermarket roles.
Freighter Conversions
During the next 20 years, 75% of fleet additions for both market growth and replacement needs will come from modified passenger and combi airplanes. Significant on-ramp acquisition cost advantages Freighter Conversions Comprise 75% of Fleet Additions associated with conversions Freighter aircrafts, units can be counteracted by 4,000 deficiencies in reliability, operating cost, and 3,000 capability of conversions, New freighters Fleet compared with production additions, models. As with 2,950 units 2,000 Conversion market production models, the breadth of the 1,000 product family can be Current/retained fleet important in the conversion market, so conversion 2003 2023 providers will continue to expand their offerings.
95
Operators targeting premium, longer range service often find production freighters more attractive than conversions. Because cargo payloads generate, on average, only half as much revenue Future Freighter Delivery Source Depends on Size Category by weight as passenger payloads, freighter Standard-body (< 50 tons) Medium widebody (40-65 tons) profitability is extremely Large (> 65 tons) sensitive to airplane size. Large Thus, acquisition cost 436 928 total new Standard-body advantages of freighter 1,236 total 1,184 conversions are much more 492 converted converted significant for standard-body freighters than for widebodies.
236
This acquisition cost sensitivity converted 52 new explains why conversions account for different Total 2,950 units (2,226 coverted, 724 new) percentages of fleet additions in the various size segments. Barely half of added large freighters will come from conversions, while 70% of medium widebody freighters and 95% of standard-body freighters will be converted from the passenger fleet. Among widebodies, the most popular conversions will continue to be 747, MD-11, A300 and 767. For standard-bodies, 757, 737, and, later in the forecast period, A320s will predominate.
Medium new widebody 786 total
550
96
Freighter Deliveries by Carrier Domicile

During the next 20 years, more than half of all freighter deliveries will be to North American carriers, dominated by express operators. A move toward medium widebodies will North America Will Account for More Than enable express carriers to Half of 2004-2023 Freighter Deliveries meet an overall higher-than Number of airplanes in 2023 industry-average traffic Large (> 65 tons) 1,600 Medium widebody (40-65 tons) growth. Conversion Standard-body (< 50 tons) freighters will be attractive 1,200 to express operators because aircraft utilization rates are characteristically 800 low among express operators. Asia-Pacific 400 carriers will continue to add large freighters for long-haul routes, while standard-body North America Asia-Pacific* Europe Africa and Latin America Middle East freighters will serve emerging * Includes Southwest Asia and niche segments in this geographic region. Competitively priced surface and lower-hold alternatives will limit greater mediumwidebody expansion in this region as well as Europe. The AfricaMiddle East proximity to Europe means that the medium widebody category will be most popular there, while mostly standard-body freighters are forecast for Latin America.
97
Glossary
Aircraft, crew, maintenance, and insurance (ACMI) Asian economic crisis
Package (or wet) lease of an airplane that includes the aircraft, crew, maintenance, and insurance, but excludes fuel.
Major economic downturn lasting throughout 1998 and a portion of 1999. This downturn was precipitated by the mid-1997 Thai currency collapse and ultimately adversely impacted most Asian banking, currency, and investment sectors.
Available tonnekilometer (ATK) Bottom-up approach
The number of tonnes capable of being carried, multiplied by the number of kilometers flown. Analysis technique beginning at the most detailed (micro) level, moving up with less specificity only after considering complex, interrelated foundational effects.
CAEP
Committee on Aviation Environmental Protection, an ICAO consultative body that studies the impact of aviation on the environment.
Cargo
Freight, express, and airmail are the three components of cargo used in this document.
European Union
A political and economic regional bloc in Europe that currently consists of the following countries: Austria, Belgium, Cyprus, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden, and the United Kingdom.
Express
Cargo with a guaranteed or time-definite service component. Express carriers are usually characterized as integrated because, in addition to carrying mostly airport-to-airport, time-definite cargo, they also bring together many other services, such as door-to-door pickup and delivery.
Foreign direct investment (FDI) Freight tonnekilometer (FTK) Gross domestic product (GDP) Integrated carrier
Investment into a countrys manufacturing or service sector by an entity domiciled in a different country. 1 tonne of cargo carried 1 kilometer.
The total output of goods and services within a country.
A cargo company providing a complete service offering to its customers, bringing together pickup, airport-to-airport transport, and delivery, along with all of the supporting ancillary services. Usually synonymous with a carrier providing express services.
Glossary
99
IATA ICAO Just-in-time (JIT)
International Air Transport Association. International Civil Aviation Organization. A manufacturing and distribution system that relies on meeting immediate needs, as opposed to carrying large inventories just- in- case.
Less-thantruckload (LTL) Linehaul Load factor Logistics provider
A term used by motor carriers to designate smaller shipments that are handled as loose pieces, as opposed to full truckloads. Point-to-point basic cargo carriage offering minimal additional services. Revenue tonne-kilometers divided by available tonne-kilometers. Service company providing the procurement, distribution, maintenance, and replacement of material and personnel.
Maquila or maquiladora sector
Function or sector that describes production by a facility for another party, who designs the good or service, plans production processes, provides raw materials, and retains ownership of the goods with attendant tax benefits.
On-ramp acquisition cost Outsize cargo
Total costs, including airframe, maintenance, upgrades, and conversion to make the freighter ready for service. Freight that is too dimensionally large or heavy for current widebody freighter airplanes.
Pacific Rim, or Pac 12
The 12 major Asian-Oceania trading countries. They are Australia, Hong Kong, Indonesia, Japan, Korea, Malaysia, New Zealand, Peoples Republic of China, the Philippines, Singapore, Taiwan, and Thailand.
Pan-European Positioning traffic
Across, including all or most, continental European countries. Transit cargo being positioned for transport to an onward ultimate destination.
Revenue tonnekilometer (RTK)
Usually used interchangeably with FTK but can include passenger weight for total revenue.
Road feeder service (RFS)
Cargo that is transported by surface means (usually by dedicated truck) on an airway bill (AWB). Carriage can be exclusively between origin and destination by air or surface.
Ruble crisis
The massive devaluation in August 1998 primarily caused by lack of foreign investor confidence in the Russian nations ability to service its debt obligations.
100
SARS (severe acute respiratory syndrome)
Serious, highly communicable virus with flulike symptoms, originating in southern China, ultimately resulting in hundreds of deaths worldwide. Because of initial uncertainty surrounding its origin and cause and the absence of any known cure, passenger air traffic plummeted dramatically during the first half of 2003, until strict detection and quarantine measures were implemented. Negative impacts were felt mostly in Hong Kong and Southeast Asia. With limited passenger service, lower-hold air cargo capacity was likewise restricted, requiring augmentation by increased freighter service.
Sea-air traffic
Cargo that is transported from origin to destination by sea and air, taking advantage of the lower cost by ocean ship between seaports and the speed of air over landmasses to optimize a balance between time and cost.
Technology bubble
Portion of the economy that during the mid- to late 1990s resulted in inflated values relating to the proliferation of increasingly sophisticated information and telecommunication technologies. The bursting of this bubble (collapsing values) began with the dot-com sector in early 2000.
Time-deferred services
Competitively priced cargo services, compared with those with time guarantees because of less exacting performance standards; for example, for a reduced shipping price, delivery might be deferred from next-day to second- or third-day after tendering.
Time-definite services
Cargo services with a performance guarantee based on time. Often that includes a refund of all or a portion of the payment made for same service if the advertised delivery time is not met.
Top-down approach
Analysis technique that begins with a broader (macro) perspective, applying trends and conclusions to more specific situations.
Truck flights
Also known as road feeder service. Cargo that is transported by surface means (usually by dedicated truck) on an airway bill (AWB). Carriage can be exclusively between origin and destination by surface or also feed airport-to-airport air or surface.
Wet lease
Arrangement that includes all facets of operating an airplane on a carriers behalf, including the airframe, crew, and most, if not all, of the airplane-related expense items.
Y2K Yield
Serious Year 2000 computer compatibility issues. Airline charges as measured in units of aggregated weight and distance (e.g., revenue per tonne-kilometer).
Glossary
101
Appendix
World Airline RTKs (millions)
1993 U.S. airlines Freight Mail Total Non-U.S. airlines Freight Mail Total 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003*
25,033 3,227 28,261
29,340 3,285 32,625
31,306 3,553 34,859
33,467 3,691 37,158
37,491 3,897 41,387
38,013 3,904 41,917
39,298 4,030 43,328
41,640 4,086 45,727
38,470 3,748 42,218
41,002 4,210 45,212
42,481 4,192 46,673
56,577 2,121 58,699
62,941 2,153 65,094
70,608 2,277 72,885
75,760 2,280 78,040
85,685 2,297 87,982
85,089 2,375 87,464
91,655 101,099 2,481 2,586 94,136 103,685
95,856 102,666 107,082 2,642 2,717 2,725 98,498 105,382 109,807
World airlines (U.S. and non-U.S.) airlines 81,611 92,281 101,914 109,226 123,176 123,102 130,953 142,739 134,326 143,667 149,564 Freight 5,349 5,438 5,830 5,971 6,193 6,279 6,511 6,673 6,389 6,926 6,917 Mail 86,959 97,719 107,744 115,198 129,369 129,381 137,464 149,412 140,715 150,594 156,481 Total *Preliminary
U.S. Airlines RTKs (millions)

1993 U.S. domestic Scheduled freight Charter freight Mail Express carriers Total U.S. international Scheduled freight Charter freight Mail Total Total U.S. airlines Scheduled freight Charter freight Mail Express carriers Grand total *Preliminary 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003*
4,146 424 2,494 8,950 16,014
4,501 685 2,540 10,281 18,007
4,578 364 2,781 11,278 19,002
4,397 520 2,864 11,810 19,591
4,581 578 3,076 12,699 20,935
4,056 721 3,161 13,157 21,095
4,357 477 3,304 13,608 21,746
4,704 733 3,314 13,791 22,542
4,111 911 3,057 12,381 20,460
4,127 657 3,536 12,513 20,834
4,148 790 3,473 12,681 21,092
9,444 2,070 733 12,247
11,406 2,467 745 14,618
11,944 3,142 772 15,858
12,709 4,031 826 17,566
15,752 3,881 821 20,453
16,248 3,831 743 20,822
17,560 3,295 726 21,582
19,695 2,717 772 23,185
18,668 2,399 691 21,757
19,599 4,105 674 24,378
18,222 6,641 719 25,581
13,590 2,494 3,227 8,950 28,261
15,907 3,152 3,285 10,281 32,625
16,522 3,506 3,553 11,278 34,859
17,106 4,551 3,691 11,810 37,158
20,333 4,459 3,897 12,699 41,387
20,304 4,552 3,904 13,157 41,917
21,917 3,773 4,030 13,608 43,328
24,399 3,450 4,086 13,791 45,727
22,779 3,310 3,748 12,381 42,218
23,726 4,762 4,210 12,513 45,212
22,370 7,430 4,192 12,681 46,673
Appendix
103
Appendix, continued
Non-U.S. Scheduled Airlines RTKs (millions)
1993 Europe (less CIS) Freight Mail Total Western Hemisphere Freight Mail Total Middle East Freight Mail Total Asia and Pacific Freight Mail Total Africa Freight Mail Total CIS Freight Mail Total 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003*
19,149 883 20,031
21,866 904 22,769
23,701 882 24,583
24,817 928 25,745
28,897 957 29,853
28,699 953 29,652
30,511 927 31,438
33,639 1,019 34,658
31,327 1,000 32,327
31,569 971 32,540
32,547 973 33,520
4,641 239 4,881
5,129 231 5,360
5,212 266 5,478
5,263 191 5,455
5,271 175 5,445
6,401 212 6,613
6,105 270 6,375
6,311 211 6,522
5,861 204 6,065
5,640 226 5,866
5,511 213 5,724
2,882 74 2,956
3,342 72 3,414
3,774 69 3,842
3,790 68 3,858
4,076 65 4,141
4,092 74 4,166
4,180 73 4,253
4,606 83 4,688
4,531 86 4,617
5,613 96 5,710
6,370 112 6,482
24,905 809 25,714
27,581 833 28,414
32,172 971 33,143
35,422 1,018 36,440
40,415 1,027 41,441
39,438 1,066 40,505
44,142 1,130 45,272
47,665 1,182 48,847
45,243 1,249 46,492
50,821 1,325 52,146
52,738 1,323 54,060
1,309 39 1,348
1,422 46 1,468
1,418 32 1,450
1,553 24 1,577
1,673 22 1,696
1,652 25 1,677
2,056 42 2,098
2,115 46 2,161
2,056 51 2,107
1,811 43 1,854
1,991 45 2,035
910 77 987
889 68 957
985 58 1,043
937 52 989
870 52 922
953 44 998
1,039 40 1,079
1,215 45 1,260
1,115 51 1,167
1,242 56 1,298
1,319 60 1,379
Total non-U.S. scheduled cargo Freight 53,796 Mail 2,121 Total 55,917
60,229 2,153 62,382
67,262 2,277 69,539
71,782 2,280 74,062
81,201 2,297 83,498
81,235 2,375 83,610
88,033 2,481 90,514
95,550 2,586 98,136
90,134 2,642 92,775
96,697 100,475 2,717 2,725 99,414 103,200
Total non-U.S. charter freight
2,782
2,713
3,346
3,978
4,484
3,854
3,622
5,549
5,723
5,968
6,607
Total non-U.S. cargo 58,699 (scheduled and charter) *Preliminary
65,094
72,885
78,040
87,982
87,464
94,136 103,685
98,498 105,382 109,807
104
The Boeing Company

Airline Fleet Revenue Analysis P.O. Box 3707 MC 21-33 Seattle, WA 98124-2207 www.boeing.com
BOEING is a trademark of Boeing Management Company. Copyright 2004 Boeing. All rights reserved.
Printed in U.S.A. 2824 9/04

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Foreword

Tom Hoang 206-766-2568 thomas.l.hoang @boeing.com

Jim Edgar 206-766-2643 james.r.edgar @boeing.com

World Air Cargo Forecast 2004/2005

World Overview and Forecast North America

Commonwealth of Independent States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .79 Domestic China

World Freighter Fleet

Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .99 Appendix

Executive Summary and Significant Industry Trends

2003 Air Freight Growth by Major Market

Executive Summary and Significant Industry Trends

World Air Cargo Forecast 2004/2005

Widebody ACMI Services

World Air Cargo Growth Detail

World Air Cargo Forecast 2004/2005

Executive Summary and Significant Industry TrendsTitle

World Overview and Forecast

World Air Freight Yield

2003 World Air Cargo Components

156.5 billion RTKs

World Charter Air Freight

World Scheduled Air Freight

World Air Cargo Forecast 2004/2005

World Overview and Forecast

New trade relationships

National development programs Oil price and availability Deregulation

Express market Just-in-time concepts

Air and surface

World Air Cargo Forecast 2004/2005

Strong Relation of Air Cargo Traffic to GDP

World Economic Growth

World Overview and Forecast

World GDP Growth

World Air Cargo Forecast

World Air Cargo Forecast 2004/2005

World Airmail Will Grow 2.9% per Year Through 2023

2.6% growth per year

Share of World Market by Carrier Domicile

U. S. 29.8% Non U. S. 70.2% Non U. S. 76.6%

World Overview and Forecast

Regional Air Cargo Markets

World Air Cargo Forecast 2004/2005

World Overview and Forecast

U.S. Domestic Air Cargo in 2003

Canadian Domestic Air Cargo in 2003

U.S.-Canada Transborder Air Cargo in 2003

World Air Cargo Forecast 2004/2005

Cargo Carriers Use of Trucks Increases

World Air Cargo Forecast 2004/2005

North America Economy and Forecast

North America Air Cargo Forecast

World Air Cargo Forecast 2004/2005

2.8% growth per year

Latin America and North America

Latin America and North America

World Air Cargo Forecast 2004/2005

Air Trade Commodities

Latin America and North America

North AmericaLatin America Air Cargo Market Forecast

World Air Cargo Forecast 2004/2005

2.0% growth per year

1.4% growth per year

Latin America and North America