Air cargo industry may see short-term downside due to threat of trade tariffs

Despite being buffeted by several crosswinds, air cargo has managed to steer a course towards a brighter horizon.The threat of trade tariffs being imposed by the United States is the latest to confront the air cargo industry, which would clearly affect the amount of goods carried in the long term. There may be a short-term upside though as shippers look to send goods before the tariffs hit.The various elements at play will be discussed in detail at the forthcoming World Cargo Symposium that will be held in Dubai in April.With a double-digit increase in cargo tonne kilometres (CTKs) in 2024, the sector now comprises 15.6% of industry revenues compared with 12% in 2019. The market has grown across all regions and major routes.With global trade and GDP growth stable at about 3%, a solid 2025 is in the offing. In fact, IATA estimates revenues will reach $157bn based on a 6% hike in demand.Moreover, yields remain about a third above 2019 levels and there are no signs that it will revert. "It does appear that there has been a structural change for the better since the pandemic,” says Brendan Sullivan, IATA’s Head of Cargo.The strength of e-commerce is a major plus point and will represent a growing portion of air cargo business. Currently, e-commerce averages about 20% of cargo business industry-wide, but it is expected to grow to at least a third of all cargo shipments.Given that, by 2027, e-commerce is expected to be an $8tn market segment, the sector stands to reap a significant reward if it can get its product correct, IATA noted."And that means speed and transparency,” says Sullivan. "Shippers and their customers need the goods to travel quickly and safely and to know where those goods are every step of the way.”The added layer of transparency will come through digitalisation. Air cargo’s efforts in this sphere are gaining momentum.The cornerstone is ‘ONE Record’, an open-source messaging standard that replaces legacy methodology. It is a standard for data sharing and creates a single record view of the shipment.ONE Record is mandated for use from early January 2026. There are some 200 companies involved in pilots and 10 projects are at an advanced stage.Artificial intelligence (AI) is also seeping into the sector. There are a lot of manual processes — such as acceptance — which take time and detract from air cargo’s value proposition. AI can assist in the safety and speed of the decision-making process and so improve productivity.Innovation will be a regular feature of the sector moving forward, says Sullivan. "There will be an Innovation Showcase at WCS,” he informs. "We will look in detail at what areas would benefit and the challenges in implementation.”To ensure that air cargo’s digitalisation maintains its quickening pace, IATA — through the Cargo Advisory Council. As of December 2024, there were 17 signatories.Digitalisation will also help the sector’s sustainability efforts. The amount of paper saved is noteworthy but there is much more being done — and much more to do. Some 24% of e-commerce is empty packaging, for example. More efficient use of space will make air cargo more productive and more sustainable.Air cargo is making a concerted effort to reduce single-use plastic, either eliminating it entirely or at least reducing the size and thickness where possible. The sector is equally committed to recycling and working with reusable items.In fact, circularity has a massive role to play in air cargo. Looking at the lifecycle of such items as Unit Load Devices (ULD) could reduce waste while enhancing productivity.Sustainable Aviation Fuels (SAF) are also a feature given that approximately half of air cargo is flown by passenger aircraft, many of which can use a percentage of SAF in their fuel uptake.As ever in aviation, there are downside risks. The most obvious for air cargo is the threat of trade tariffs being imposed by the United States, which would clearly affect the amount of goods carried in the long term. There may be a short-term upside though as shippers look to send goods before the tariffs hit.Tariffs also need to be seen as part of the bigger customs regulation picture. Getting clearance for shipments is a sector pain point and — unwelcome as they are — it could be that new tariffs open the way for fresh discussions, greater digitalisation, and a speedier process.The air cargo industry operates in a highly interconnected global environment, making it vulnerable to geopolitical tensions such as trade disputes, sanctions, armed conflicts, and regulatory shifts.To effectively navigate these challenges, industry players—including airlines, logistics firms, and regulators—must adopt a multi-faceted strategy by diversifying supply chains and trade routes, leveraging technology and digitalisation, strengthening regulatory and compliance strategies, building strategic alliances and public-private partnerships and enhancing security and crisis management protocols.Pratap John is Business Editor at Gulf Times. X handle: @PratapJohn.