Market Trends in the Air Freight Industry

8/12/2019 Market Trends in the Air Freight Industry

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Presented by

Didier Lenormand

Director - Business DevelopmentCustomer Affairs

Market Trends in the Air Freight Industry-A Chinese Air Cargo Industry Perspective


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Air cargo is a growth market: Some industry trends

Asia and China are keeping the lead

What freighter aircraft for China


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Air freight is a growth marketPassenger aircraft role in air freight will decrease

FTKs (billion)500

66%

34%

59%

41%Belly Holds+4.8%p.a.

DedicatedFreighters+6.5%p.a.

Total Cargo+5.88%p.a.

141.1

442.7

400

300

200

100

02003 2023

Traffic volume will more than triple over the coming20 years


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Nearly 60% of cargo FTKs will be flown onUS-Europe-Asia Pacific routes

Share of 2023 FTKs(FTKs growth: average per annum 2003-2023)

Source: Airbus Global Market Forecast, 2004

9 . 7 6 %

2 6. 1 5 % ( + 6

. 5 % )

1 9 .7 8 % ( + 6 .3 % )

2 . 9 6 % ( + 5 . 6 %

)

3 . 6 %

( + 5 . 3 %

) 2 . 7 3 % ( + 5 . 7 % )

2 .8 5 % ( + 5 .5 % )

11.53%

0.5%

~9 .9 % Other flows

2 6. 1 5 % ( + 6.

10.23%(+4.3%)

(+ 4.9%)

(+7.3%)

(+5.0%)

80% of air cargo traffic will be long-range,intercontinental, hub-to-hub


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The freighter fleet will more than doubleThe freighter fleet will more than doubleThe freighter fleet will more than double

477

2,412

727

0

500

1,000

1,5002,000

2,500

3,000

3,500

4,000

2003 2023

1,506

3,616

Number of aircraft

Conversions

New freighters

Retained in service

+4.3% p.a.

A large replacement requirement, 727 newfreighters and a market dominated by conversions


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More than 3100 freighters will be delivered

189

391

913919

0187

142

398

0

200

400

600

800

1,000

1,200

Small jetfreighters

Regionalfreighters

Long-rangefreighters

Large freighters

919

1,100

331

Number of aircraft

789

Total new a/cTotal converted a/cTotal a/c

7272,4123,139

2004-2023

Regional operations: low utilisation

Mostly conversionsLong range flights: high ut ilisation

Nearly equal mix of new & conversions


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2003-2023 freighter fleet by region

Latin America2003 fleet 2023 fleet

67 183 Africa2003 fleet 2023 fleet

38 88

Middle East2003 fleet 2023 fleet

18 37

Asia-Pacific2003 fleet 2023 fleet

173 592

Europe2003 fleet 2023 fleet

230 466

North America2003 fleet 2023 fleet

980 2,250

World2003 fleet 2023 f leet

1,506 3,616

By 2023, the Asian fleets will have more thantripled from their current sizes


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Widebody freighters have grown in importanceWorld Freighter Fleet 1970~2003

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003

%

F l e e

t

WidebodySingle-aisle

44%

56%

and will continue to do soFleet at mid-year point . Includes factory built and converted aircraft. Source: Airclaims CASE


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World international traffic - Densities

( Includes belly and freighter cargoes )

135

140

145

150

155

160

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

kg/m3

Standard AverageExpress

Beside the major changes in the freight industry,on-board densities are stable around 155Kg/m 3since 10 yearsSour ce: MGI 2005


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2005 - 2015 Main drivers of traffic growth:

Economic expansion of Asia/Pacific region. Very large emerging economies are taking off.

ChinaIndia

Concentration of population, wealth, and industries

leading to higher local consumption. Continued trade liberalization :

December 2001 : China becomes 143th WTO member

January 2002 : Taiwan becomes 144th WTO member July 2004: China-US bilateral allows five-fold increase of direct capacity by 2010

Global companies need global cargo services :Lean inventory strategies : Just-in-Time, made-to-order call for frequenciesRelocation of production in low-labor-cost countries

Hub and spoke and direct interlined operations: compatible aircraft


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Asia and China are keeping the lead

From the top 20 freight markets in 2023: 13 are


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From the top 20 freight markets in 2023: 13 arelinked to Asia, representing 48% of world FTKs

0 10 20 30 40 50

Domestic USAPRC - North America Asia - North America

Europe - North AmericaNorth America - Europe

Asia - EuropeDomestic PRC

North America - AsiaPRC - EuropeEurope - AsiaEurope - PRC

Japan - North AmericaNorth America - Japan

North America - PRCEurope - JapanJapan - Europe

South America - North America Africa - Europe

Europe - South AmericaSouth America - Europe

FTKs (billions)

2003 traffic 2004 2023 growth


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The Asia/Pacific freighter fleet will more than triple

15892

207

293

90

104

0

100

200

300

400

500

600

2003 2013 2023

173

592Number of aircraft

Conversions

New freighters

Retained inservice

+7.4% p.a.

352

+5.3% p.a.

At 6.4%p.a. growth Asia will require in 2023 morethan three times more all-cargo aircraft than mow

A need for mid sized freighter is not only feeder


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A need for mid-sized freighter is not only feederservices in Asia but a market in its own right

A fast growing regional cargo market exists within Asia andit consists of:

Mail, parcels and documents

High value goods JIT and supply chains Valuable cargo

It is mostly high value - low density commodities

Intra Asia is a maturing market with specific requirements Night ops is the preferred choice, late pick-up / early delivery: Belly

only capacity not adequate Intra Asia is a volume driven market: Wide body aircraft are better

fitted

Intra-Asia will require a cargo fleet on its own right:Not long-haul tag-ends nor simply belly-only services

Intra Asia : Late pick up early deliveries a need


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Intra Asia : Late pick-up, early deliveries - a needfor dedicated night, all-cargo services

Only all-cargo aircraft can offer late afternoon pick-upand more particularly, late night delivery flights

0200400600800

100012001400

160018002000

0 . 0 0

- 2 . 0 0

2 . 0 0

- 4 . 0 0

4 . 0 0

- 6 . 0 0

6 . 0 0

- 8 . 0 0

8 . 0 0

- 1 0 . 0 0

1 0 . 0 0 -

1 2 . 0 0

1 2 . 0 0 -

1 4 . 0 0

1 4 . 0 0 -

1 6 . 0 0

1 6 . 0 0 -

1 8 . 0 0

1 8 . 0 0 -

2 0 . 0 0

2 0 . 0 0 -

2 2 . 0 0

2 2 . 0 0 -

2 4 . 0 0

Intra Asian network: DeparturesHourly tonnes offered

FedEx

A typical belly onlyoperation

More main deck cargo capacity is required in the


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More main-deck cargo capacity is required in theChinese regional market

Years

Tonnes

19?? 20??

Belly capacity

Cargo traffic

Need for Dedicated freighter

China will also follow this evolution with a fastrising need for dedicated regional all-cargo lift


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Air freight in China

The freight industry eyes at the large and fast growingexport driven long-haul market ex-China

However a domestic and a regional market exist

China is a large country about the size of Europe Communications across China are not easy Ground infrastructure serves the major cities inter-land only

Air transport plays an increasingly large role Recent ACMI / orders for mid-size freighters witness this

necessity

More than 30 A300/A310 Freighters on order or in


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More than 30 A300/A310 Freighters on order or inservice in Asia: A recognised role as regional aircraft

Air Hong Kong8 A300-600RF

Air MacauWet-leased A300B4Fs

2 A300-600RP2F

AIR M ACAU

China EasternWet-leased A300B4Fs

3 A300-600RP2F in 2008

China Eastern

Dragonair Wet-leased A300B4Fs

FedEx A310F in regional operations

China SouthernChina Southern

6 A300-600RP2F

Sagawa1+1 A300-600RF

T ffi i b l d Chi USA l


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Traffic imbalance today: China-USA example

Large imbalance mostly due to consumer and high-tech goods: Exports to imports, consumer goods: 10 to 1 Exports to imports, high-tech goods: 6 to 1

Airfreight,China to US

1000Ts2004

%

Consumer 326

238

94

76

75

3

Food 1 0%

812

40%

High tech 29%

Capital 12%

Intermediate 9%

Other 9%

Primary 0%

Total 100%

Airfreight, US toChina

1000Ts2004

%

Intermediate 69

53

40

31

18

10

Food 4 2%

226

30%

Capital 23%

High tech 18%

Consumer 14%

Other 8%

Primary 5%

Total 100%

So far an export driven marketSource: MergeGlobal

Traffic imbalance the opposite case:


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Traffic imbalance the opposite case: A mature market, Europe-USA

Moderate imbalance driven mostly by difference in capital goods flowsand consumer habits

Europe and USA have very similar level of development and productioncapacities. Traffic tends to be fairly balanced.

Airfreight,Europe to US 1000Ts2004 %

Capital 343

272

271177

144

79

Primary 21 2%

1308

26%

Consumer 21%

Intermediate 21%High tech 14%

Other 11%

Food 6%

100%

Airfreight, US toEurope 1000Ts2004 %

Intermediate 285

209

184132

82

69

Primary 34 3%

995

29%

Capital 21%

High tech 18%Consumer 13%

Other 8%

Food 7%

100%

Source: MergeGlobal

As local demand grows, the Chinese traffic willtend to become more balanced

China's industrial production continues to


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China s industrial production continues togrow fast

Industry share of real GDP, constant US$

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

1980 1985 1990 1995 2000 2005 2010 2015 2020 2025

Bn$ US

USAEuropeChina

Source: Global Insight

By 2020 Chinese output will exceedthat of Europe

More and more Chinese households will be


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More and more Chinese households will beable to afford imported goods

0

20

40

60

80

100

120

140

160

180

200

1985 1990 1995 2000 2005 2010 2015 2020

Source: Global Insight

Millions household with PP incomes above 30K$, real 1997 dollars

History Forecast

USA

China

Chinese market will soon become a large consumer market:Paving the way for more diversified and larger importsreducing dramatically the current traffic imbalances

Drivers for Chinese airfreight


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Drivers for Chinese airfreight

Just-in-time manufacturing export driven Driving long-haul export growth

General economic development - not only for exports: More high-value goods are purchased by Chinese consumers:computers (+35% urban areas*), mobile phones (+72% rural areas*)... A fast growing consumer market heading to improve traffic balance

Manufacturing moving to more remote cities with lowerlabor cost Beyond trucking reach from major gate-ways: Feeder role rapidly emerging Emphasis on development of Western region

The Chengdu example: The next Chinese cargo gate-way?(recently open cargo services with DLH and KLM)

On the long run we will see a dramatic improvement of theimbalances of the traffic between China and

the rest of the world* Source: China Statistical Yearbook 2004


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What freighter aircraft for China

Frequencies are key to the industry: Hub and spoke


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q y y pwill sustain the market requirements for daily services

Hub and spoke is a key condition for daily services,as a result

efficient interlining is becoming key to success - industry wide

Long haul operations : Between hubs with larger aircraft

Regional operations : Intermediate capacity for daily serviceswherever it is required

Airbus wide-body freighters:


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y g A310P2F, A300-600RF, A330-200F

Beijing

SIN

DXBDEL

ANC

TAS

KHI

SVO

85% most adverse annual winds85% most adverse annual windsISA temperatureISA temperature3% Airways allowance3% Airways allowanceTypical international flight rulesTypical international flight rules

Highest MTOW, GE enginesHighest MTOW, GE enginesGeneral cargo configurationGeneral cargo configurationMax structural payloadMax structural payload

A310-300P2F39.6t, 3300nm

A300-600RP2F

48t, 2550nm

A330-200F64.3t, 4000nm

Ideally suited for China, Asian & far beyond!

A330-200F: Development study

A330F: Flight operational commonality with the A380F


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A330F: Flight operational commonality with the A380F

A320 family

A330 Family, A350 Family &

A380

Cross crew qualificationQualifying from one aircraft to another

Difference Training rather than a Full Type Rating

Mixed Fleet FlyingOne pool of pilots flying different aircraft types

Reduces training time, reduces number of crews,simplifies maintenance

A unique Airbus advantage

A380F : Designed with the airlines inputs


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A380F : Designed with the airlines inputs

Airlines inputs for the A380F, since 1996, froma knowledgeable group of major cargo players

A380F: more range = more lift, furtherF ll l d LAX d AMS/CDG/FRA


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gFull payload to LAX and AMS/CDG/FRA

Beijing Amsterdam

Anchorage

Los Angeles

Vancouver

Sydney

ParisFrankfurt

Out-bound winds3% airways allowance85% Annual Probabil ityISA

A380-800F:5600 NM @ 150 t

Out-bound traffic ex Beijing: A380F with full payload to Los Angeles and Europe

A380F: More range = less aircraft in fleet


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A380F: More range less aircraft in fleet

PEK

PVG

CDG LUX

ANC

LAX

SEA

SFO ORD

JFK

DFW

ANK x x

624 stops per year in PEK to/from Europe = 1,248 hours / year

676 stops per year in PEK from USA = 1,352 hours / year 1,404 stops per year in ANC to/from USA = 2,803 hours / year

Assumes current frequencies, 1 stop = 2 hour ground time & typical aircraft ut il isation

Cutting technical stops in Beijing & Anchorage

saves 5,408 hours per year Equivalent to 1.4 aircraft

A380F one aircraft, 3 design densities offeringi il l d


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similar revenue payloadsHigh volume layout: Express freight37,870 cu.ft.*

Tare : 8,875 kg

Max revenue payload140,820kg

Design density = 8.2 lb / cu.ft.

35,370 cu.ft.*

Tare : 8,375 kg

Max revenue payload

141,300kg

Intermediate layout

Design density = 8.8 lb / cu.ft.

31,990 cu.ft.*

Tare : 7,375 kg

Max revenue payload142,320kg

High density layout: General cargo

Design density = 9.8 lb / cu.ft.* excluding bulk

Close to the Chinesemarket requirements

Close to the Chinesemarket requirements

The A380F offers both high and low design densities

These densities reflect the specific traffic patterns exChi


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ChinaPRC-North America

110

120

130

140

150

160

170

180

1 9 9 5

1 9 9 6

1 9 9 7

1 9 9 8

1 9 9 9

2 0 0 0

2 0 0 1

2 0 0 2

2 0 0 3

2 0 0 4

kg/m3 PRC-Europe

110

120

130

140

150

160

170

180

1 9 9 5

1 9 9 6

1 9 9 7

1 9 9 8

1 9 9 9

2 0 0 0

2 0 0 1

2 0 0 2

2 0 0 3

2 0 0 4

kg/m3

World average

8.2lb/ft(8.2lb/ft3)

Low densities result from volumesof apparel and other consumerproducts.

High-tech equipment exports growfaster, resulting in a slight increasein densities

Increase in density have stabilizedat a low value, in line with transPacific markets

Source: MGI 2005

A380F : Outsize cargo - it does carry them


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: g y

WIDER than 747F door WIDER than 747F door

744F744F 3.05 mclear

3.40 m clear

2.62 mclear

4.27 m clear

A380F A380F

Large automobiles eg Mercedes S Class 5.2m long

Large cylindr ical object 10m long x 2m dia.Running loads permit weights up to 30t in this section

Bell 206 Jetranger helicopter (9.5m long)

777F777F 3.07 mclear

3.58 m clear

WIDER than 777F door WIDER than 777F door

2.62 mclear

4.27 m clear

A380F A380F

A380F has the widest main deck cargo door

A380F upper deck cargo loader:Where is the issue?


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Where is the issue? Airbus has facilitated an industry working group to

develop upper deck loader solutions Meetings held between May 2003 and April

2005 involving Airlines

GSE Manufacturers Standardisation bodies Handling agents

Solutions from 7 manufacturers are now beingoffered on the market:

, Trefel, FMC, TLD

First 2 vehicule will enter in service with

FedEX in 2007 Upper deck loaders can indeed be usedfor other wide-body aircraft:DC10F/MD11F and Airbus wide body

Upper deck loaders are now in production and will be testedbefore the A380F enters into commercial service

A380F: More efficient on the ramp smaller aprondeepth than 747 8F


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deepth than 747-8F

6510sqm6510sqmRamp spaceRamp spaceRamp spaceRamp space

747747 --400F400FSource: Boeing ACAP manual

5810sqm5810sqmRamp spaceRamp space

65m65m

89.3m89.3m

747747 --400F400FSource: Boeing ACAP manual


65m65m

89.3m

A380 A380 --800F800F


73m73m

80m80m

747747 --8F8F

92.9m92.9m

5810sqm 6350sqm

68.4m68.4m

+16.6m+16.6m

747-8F requires 9.2% more ramp space than A380F.Back-of-stand clearance problems (with adjacent taxiway)is also identified in Shanghai-Pudong airport for instance

To conclude


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Cargo market will continue to grow strongly World average +5.9% p.a. to 2023: traffic will more than triple Asia and China will keep the lead of that growth pattern

Chinese airlines are emerging as major global cargo players The Chinese economy has become a major global industry player A strong middle class is emerging in China:

This will help balancing long-haul traffic

Freighter fleets will more than double world wide Wide-body freighters will continue to dominate the market From a Chinese perspective, the A380F is the best solution for

the Chinese airlines long-haul market growth requirements


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(Thank You)(Thank You)

Want to know more about usand our predictions?Look at:

airbus.com-gmf


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This document and all information contained herein is the soleproperty of AIRBUS S.A.S. No intellectual property rights aregranted by the delivery of this document or the disclosure of

its content. This document shall not be reproduced ordisclosed to a third party without the express written consentof AIRBUS S.A.S. This document and its content shall not beused for any purpose other than that for which it is supplied.

The statements made herein do not constitute an offer. Theyare based on the mentioned assumptions and are expressedin good faith. Where the supporting grounds for thesestatements are not shown, AIRBUS S.A.S. will be pleased toexplain the basis thereof.

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