Randy's Journal: A Boeing Blog: Air Cargo Carries Growth Momentum Into 2018

The title of this blog probably gives it away. These are some of the new routes launched this year by the world's top cargo operators to meet the increasing demand for air freight services around the world. The renewed strength of the air cargo sector is encouraging as it is an important part of our industry and, for that matter, the broader economy.

We have Sales & Marketing teams dispatched around the world. We also have a team dedicated to analyzing the air cargo market year-round. We are all getting the same message: Operators want more freighters. Some customers say they can't get airplanes fast enough, while others are reactivating parked freighters and returning them to service.

The strong cargo demand helps explain why we announced this week that we will increase production of the Boeing 767 to three airplanes per month in 2020. This will be our third rate hike on the 767 program in recent years and will represent a doubling of production since 2016.

It's no wonder when you look at the numbers. According to the International Air Transport Association (IATA), air freight demand grew by 9 percent in 2017 as measured by freight tonne kilometers (FTKs). Our cargo team says our internal numbers show the growth was actually closer to 10 percent.

Either number would make 2017 the strongest year since 2010 when the sector was still recovering from the Great Recession.

Air cargo is carrying the positive momentum from 2016 and 2017 right into 2018. In the first two months of this year, demand increased by nearly 8 percent.

I would note that our cargo team continues to forecast the sector growing between 4 and 5 percent for the full year, in line with the long-term growth rate of 4.2 percent according to our World Air Cargo Forecast. So I think you will see the growth rate move around from month to month, especially when certain months - such as March - face a strong comp from 2017.

What's driving the growth? While the rapid of expansion of e-commerce might seem like the key driver, it's not the biggest factor. In our analysis, air cargo volumes over the past decade have been highly tied to industrial production and world trade. In most instances, large cargo jets are simply more effective in transporting capital equipment and crucial inputs for production. So, the recent trend of synchronized growth in industrial production and trade across major regions of the world bodes well for air cargo and provides a solid tailwind for the coming months.

An equally important number to watch is capacity growth. While air cargo demand grew near double digits last year, capacity grew at just three percent as measured by available freight tonne kilometers (AFTKs). Again this year, demand continues to outpace capacity.

To catch up with demand, operators are buying new jets, especially large Boeing freighters. In February, UPS ordered 14 more 747-8Fs along with four more 767Fs. In March, ANA purchased two 777Fs. This month, Qatar Airways signed a letter of intent to buy five more 777Fs. Over the past 24 months, we have sold nearly 80 freighters and there are more campaigns in the pipeline.A rendering of a new 777 Freighter for ANA Cargo

We are proud to have the industry's most capable family of production and converted freighters, including the largest and longest-range twin-engine cargo jet in the 777F and our newest family member, the 737-800Boeing Converted Freighter, which delivers improved payload, range, and efficiency over many other standard-body freighters. And we just delivered the first 737-800BCF to GECAS earlier this month.

I can go on about each of our freighter models, but I will save that for another post. It's just wonderful to see world air cargo traffic rebounding strongly after several tough years and carrying the positive momentum forward.

It gives us great confidence that the sector will continue to be an important part of our industry, one which will require nearly 2,500 airplanes for replacement and growth over the next 20 years as the world freighter fleet expands to more than 3,000 jets.