FOREWORDThe Boeing Company issues the biennial World AirCargo Forecast (WACF) to provide a comprehensive,up-to-date overview of the air cargo industry. The forecast summarizes the world’s major air trade markets,identifies major trends, and presents forecasts for thefuture performance and development of markets, aswell as for the world freighter airplane fleet.This document would not be possible without theefforts of several contributors. The Boeing World AirCargo Forecast 2018–2037 production team includedBoeing Creative Services, Digital Strategy Team,and our colleagues in the Market Analysis Group.We give special thanks to Ryo Abe for his diligentefforts on the Airline Cargo Traffic Database (ACTD),which includes more than 800 airlines, as well as hisresearch and authoring of the Intra-Europe and SouthAsia chapters. Thank you also to Wendy Moore,who researched and modeled the air freight yieldcurves in the Air Cargo Industry Overview; KatrinaKrebs, for development of the North America chapter;Adin Herzog, who authored the Latin America andEurope chapter, analyzed the historical airline cargorevenues, and assisted in the development of the AirCargo Industry Overview; Ben Su, for analysis andauthoring of the Latin America and North Americachapter; and Jayden Lee, who developed the insightsand analysis behind the Intra–East Asia and Oceaniachapter and the Executive Summary. Lastly, wewould like to acknowledge the professional workaccomplished by summer interns Calvin Jin, OybekMuminov, and Jamshid Tokhirov, who assisted inthe research and authoring of the Europe and NorthAmerica, East Asia and North America, and DomesticChina chapters, respectively.The next update to the WACF will appear in fourthquarter 2020. The authors welcome any questionsor comments readers may have. All queries andsuggestions should be directed to the following:BOEING WORLD AIRCARGO FORECAST TEAMBoeing Commercial AirplanesP.O. Box 3707, MC 21-33Seattle, WA 98124-2207 astTom [email protected] [email protected] [email protected] [email protected] AIR CARGO FORECAST 2018–2037 2

TABLE OF CONTENTSExecutive Summary4Air Cargo Industry Overview10North America22Latin America and North America27Latin America and Europe31Europe and North America35Intra-Europe38Middle East42Africa45East Asia and North America50Europe and East Asia54Intra–East Asia and Oceania57South Asia61Russia and Central Asia66Domestic China71World Freighter Fleet75Forecast Methodology81Glossary82Appendix83

EXECUTIVE SUMMARYAIR CARGO MARKETS HAVE RECOVERED2017 AIR CARGO GROWTH BY MAJOR MARKETFollowing several years of weak demand and alagging recovery following the global economicdownturn, air cargo traffic fully recovered in 2017. Aircargo traffic grew 10.1 percent, more than double thelong-term average growth rate of 4.2 percent. Threekey elements support the recent strong uptick inthe air cargo market: synchronized global economicexpansion, increasing industrial production, and worldtrade growth. In addition, air cargo traffic greatlyoutpaced capacity growth in the last two years,absorbing excess capacity in the market. Air freightoperators have benefited as a result of rising loadfactors and yields that have improved profitability.World 10.1%Latin America–Europe 6.2%East Asia–North America 9.1%Latin America–North America 4.3%Europe–East Asia 8.1%Africa–Europe 3.7%Intra–East Asia 8.6%South Asia–Europe 6.7%Europe–North America 10.7%Middle East–Europe 0.4%Intra–North America 10.0%Intra-Europe 9.7%Domestic China 1.6%Source: IATA, ICA, ACI, AAPA, US DOT, US Trade, US DOC, TRADE, Eurostat,IHS Markit, CAAC, AAI, India DGCA, FAVT, Airline data, Airport data, BoeingGLOBAL GDP GROWTH HAS RECOVERED5%While global air freight growth has moderated in 2018after unusually strong growth in 2017, many indicatorsshow that the air cargo market is fundamentallywell positioned to sustain the growth momentumat or above the long-term trend. In addition tounderlying macroeconomic trends, strong growth ine-commerce will play an increasingly important rolein air cargo markets. Generally, goods transportedby air, such as time-sensitive perishables and highvalue commodities including computers, consumerelectronics, and pharmaceuticals, are some of thefastest-growing trade flows around the world.While there are potential risks in the market, includingtrade tensions and volatile fuel prices, air cargomarket fundamentals remain favorable. In 2018, aircargo transport measured in revenue tonne-kilometers(RTK) is forecast to grow 4 percent and cargo revenueis expected to exceed 100 billion.History4%Forecast3%2%1%0-1%-2%20072012Real GDP Growth20172022Trend GrowthSource: IHS MarkitAIR CARGO VOLUMES GROWINGAMID INTERNATIONAL TRADE SURGE7%Pickup in industrial activity underlyingimproved trade pictureGlobal trade recovery lifting air cargo 2014Q12015Q12016Industrial ProductionQ12017Q12018World TradeGDPSource: Oxford Economics, IATA, BoeingWORLD AIR CARGO FORECAST 2018–2037 4

EXECUTIVE SUMMARYE-COMMERCE IS A GROWING SHARE OFTHE AIR CARGO MARKETWhile e-commerce is a global phenomenon, themarket size varies by country. Driven by China, theAsia-Pacific region, defined as South Asia and EastAsia, is the largest e-commerce market in the world.As China continues shifting to a consumption-driveneconomy, the country’s e-commerce sales have grownalmost 40 percent in the last five years and are nowvalued at approximately 1.1 trillion. Japan and SouthKorea are the next biggest e-commerce markets inAsia-Pacific, with high income levels and urbanizationrates, as well as high-speed Internet penetration.Furthermore, many countries in Southeast Asia areemerging as fast-growing e-commerce markets. Forexample, the Indonesia market is projected to exceed 200 billion in e-commerce sales by 2025.China is the world’s largest e-commerce market1,200E-COMMERCE RETAIL SALES(IN USD BILLIONS)In the last two decades, the evolution of Internettechnology has led to the explosive growth ofe-commerce. With easy access to the globalmarketplace, the rise of e-commerce has radicallytransformed business and consumer buyingbehavior. In 2017, global retail e-commerce saleswere 2.3 trillion, more than double the 1.1 trillionspent in 2012. With no signs of slowing down, 2018is set to be another strong year, with more than 2.8trillion in sales.CHINA ONLINE RETAIL SALESHAVE PASSED 1 TRILLION1,0008006004002000201020112012United States20132014201520162017ChinaSource: US Census Bureau, National Bureau of Statistics of ChinaThe United States is currently the second largeste-commerce market in the world, with more than 450 billion in e-commerce sales in 2017, a 16 percentincrease from 2016 and the highest growth rate since2011. Led by Amazon, which now accounts for nearlyhalf of the US e-commerce industry, e-commercesales comprised 13 percent of the total retail sales in2017, a sizeable increase from 11.6 percent in 2016.While the recent boom in e-commerce has stimulatedair cargo, its contribution to air cargo growth isdifficult to quantify since air cargo packages aregenerally not identified specifically as e-commerceWORLD AIR CARGO FORECAST 2018–2037 5

EXECUTIVE SUMMARYby shippers. Yet it is clear that e-commerce isrevolutionizing customer expectations and air cargologistics. Its market size is forecast to increase 20percent per year during the next five years, to nearly 4.9 trillion in 2021.WORLD AIR CARGO WILL GROW 4.2% PER YEARAverage annual growth, 2018–2037World air cargo traffic is forecast to grow 4.2 percentper year in the next 20 years. In terms of RTK growth,air freight, including express traffic, is projected to growat a rate of 4.3 percent per year while airmail will growat a slower pace, averaging 2 percent annual growththrough 2037. Overall, world air cargo traffic will morethan double in the next 20 years, expanding from 256billion RTKs in 2017 to 584 billion RTKs in 2037.Asia will continue to lead the world in average annualair cargo growth, with domestic China and intra–EastAsia markets expanding 6.3 percent and 5.8 percentper year, respectively. Supported by faster-growingeconomies and growing middle classes, the East Asia–North America and Europe–East Asia markets willgrow slightly faster than the world average growth rate.Middle East and Latin America markets connected toEurope and North America will grow at approximatelythe world average. In the more established and maturetrade flows between North America and Europe,growth will be below the world average.RTKS (IN BILLIONS)HistoryWORLD AIR CARGO TRAFFICGROWTH OUTLOOK4.7%4.2%700Forecast6005004003.7%2.6% growth per LowSource: IHS Markit, IATA, ICAO, BoeingAIR CARGO GROWTH RATESREGIONHISTORY2007–2017World2.64.2East Asia–North America1.24.7Europe–East Asia4.24.7by percentageFORECAST2018–2037by percentageIntra–East Asia3.85.8Europe–North America0.02.5Intra–North America2.32.3Domestic China5.06.3Latin America–Europe3.04.0Latin America–North America-0.34.1Africa–Europe-1.03.7South Asia–Europe2.44.2Middle East–Europe3.33.2Intra-Europe3.12.3Source: IATA, ICAO, ACI, AAPA, US DOT, US Trade, US DOC, TRADE, Eurostat,IHS Markit, CAAC, AAI, India DGCA, FAVT, Airline data, Airport data, BoeingWORLD AIR CARGO FORECAST 2018–2037 6

EXECUTIVE SUMMARYTHE IMPORTANCE OF FREIGHTERSThere are two options for air cargo transport—dedicated freighters and passenger aircraft lowerholds (also referred to as passenger belly capacity)—and each offers unique advantages. Freighters areparticularly well suited for transporting high-valuegoods because they provide highly controlledtransport, direct routing, reliability, and uniquecapacity considerations (volume, weight, hazardousmaterials, and dimensions). These distinct advantagesallow freighter operators to offer a higher value ofservice and generate more than 90 percent of the totalair cargo industry revenue.With the introduction of a new generation of widebodypassenger airplanes with larger lower-hold capacity,more airlines are combining cargo transportationwith passenger operation to capitalize on additionalrevenue opportunities. Belly cargo space offersunique value on non-cargo routes by feedingdedicated freighter networks and providing newbusiness opportunities for integrators. However, whilelower-hold capacity in widebody airplanes servinglong-haul missions has increased by nearly 6 percentin the last five years, several parameters can limit thecargo operations in passenger aircraft. The reducedheight of the lower deck can limit volumes. Differentsecurity standards and regulations may restrictcommodities that can be shipped in passengerairplane lower holds. From a network standpoint,AIR CARGO REVENUE, YEAR 2017,TOTAL: 100,200,000,000Express Carriers 11.9B 9.1BCombinationCarriers12%All Cargo9%Passenger CargoHold Only43% 42.9B36%Airlines operatingfreighters generate 90%of industry cargo revenues 36.3BSource: FlightGlobal, US DOT, Airline data, BoeingAIR CARGO REVENUE TRENDS120AIR CARGO REVENUE(IN USD BILLIONS)Air cargo represents less than 1 percent of globaltrade by tonnage, yet air cargo transports more than 6 trillion worth of goods every year, representingmore than 35 percent of global trade by value. Sucha large disparity between tonnage and value reflectsair cargo’s unique position in transporting goodsthat often require a high level of speed, reliability,and security. Among those traded goods, computingequipment, machinery, and electrical equipmentaccount for the highest share of airborne tradetonnage versus containership tonnage.FREIGHTERS CRITICAL TO COMPETEIN AIR CARGO MARKETS10080604020020072008200920102011Express CarrierAll Cargo201220132014201520162017Combination CarrierPassenger Belly OnlySource: FlightGlobal, US DOT, Airline data, BoeingWORLD AIR CARGO FORECAST 2018–2037 7

EXECUTIVE SUMMARYfreighter routes are highly concentrated on relativelyfew trade lanes, especially in the world’s two largesttrade routes, East Asia–North America and East Asia–Europe. In contrast, passenger networks are muchbroader and often include destinations where cargodemand is minimal. This difference in passenger andcargo traffic distribution explains the considerableload factor difference in belly space and freighters,which average approximately 30 percent and 70percent, respectively. In addition, range restrictions onfully loaded passenger aircraft and limited passengerservice to major cargo airports make freighteroperations essential. For these structural reasons,freighters are forecast to carry more than half of theworld’s air cargo for the next 20 years.Express carriers continue to operate substantialfreighter fleets, flying more than half of the widebodyfreighters and generating 43 percent of air cargoindustry revenues in 2017. Because of a uniquebusiness model that is tailored to the needs of theircustomers by using unique schedules, specializedairplanes, and a door-to-door transportation network,carriers that only operate lower hold cannot offerthe same level of service.FREIGHTERS PLAY KEY ROLEIN MAJOR EAST–WEST MARKETSShare of total air cargo traffic carried by freighters75%40%75%Source: US DOT, FlightGlobal, BoeingDEDICATED FREIGHTERS CARRY—AND WILL CONTINUETO CARRY—MORE THAN HALF OF AIR CARGO TRAFFICWorld RTKs carried on freighters100%90%Average worldair cargo trafficgrowth of 4.3%80%70%Average worldair cargo trafficgrowth of 2.6%World AirCargo Forecastgrowth of 4.2%60%50%40%Low-cost carriers (LCC) have increased their shareof air cargo traffic, particularly in Southeast Asia.However, even with fast growth in passengermarkets and the recent surge in low-cost long-hauldevelopment, LCCs are still estimated to carry lessthan 2 percent of air cargo traffic.30%20%10%020002002 20042006200820102012201420162037**ForecastSource: BoeingWORLD AIR CARGO FORECAST 2018–2037 8

EXECUTIVE SUMMARYWith air cargo traffic more than doubling in the next 20years, the world freighter fleet will grow by more than70 percent, from the current 1,870 to 3,260 airplanes.Growing demand for regional express services in fastdeveloping economies will boost the standard-bodyshare of the freighter fleet from 37 percent today to39 percent. Like the current fleet, the 1,170 standardbody freighter deliveries forecast in the next twodecades will be converted passenger airplanes.In the next 20 years, 2,650 freighters are forecast tobe delivered, with approximately half replacing retiringairplanes and the remainder expanding the fleet tomeet projected traffic growth. More than 63 percentof deliveries will be freighter conversions, of whichnearly 70 percent will be standard-body passengerairplanes. A projected 980 new production freighters,valued at 280 billion, will be delivered, of which morethan 50 percent will be in the large-freighter category,such as the 747 Freighter and 777 Freighter.FREIGHTER FLEET WILL INCREASE BY MORE THANHALF; STANDARD-BODY FREIGHTERS GAIN 0830400001,870 freighters3,260 freightersStandard Body ( 45 tonnes)Medium Widebody (40–80 tonnes)Large ( 80 tonnes)Source: BoeingNEW AND CONVERTED FREIGHTERSSUPPORT FLEET GROWTH3,2603,500FREIGHTER AIRCRAFT (UNITS)FREIGHTER FLEET OUTLOOK3,000New tsConverted freighters1,6701,5001,000Current/retained fleet610500020172037Source: BoeingWORLD AIR CARGO FORECAST 2018–2037 9

AIR CARGO INDUSTRY OVERVIEWAIR CARGO FACES COMPETITION FROMOTHER MODES, STRUCTURAL DYNAMICSOF CARGO TRANSPORT MARKETSFORCES AND CONSTRAINTSFOR AIR CARGO GROWTHIndustry relocationIn addition to economic factors, a range of issuesbeyond cyclical trends influence the growth ofair cargo markets, including modal competition,environmental regulations, globalization, marketliberalization, national development programs,inventory management techniques, and new aireligible commodities. This discussion will highlightsome of these subjects.HEALTHY ECONOMIC ACTIVITY KEY TOSTRONG AIR CARGO MARKETEconomic activity is the primary influenceon world air cargo development. The world’seconomy is forecast to grow at an averageannual rate of 2.8 percent in the next 20 years.Since slowing significantly in early 2016, the globaleconomy has seen a remarkable recovery. Just twoyears ago more than two dozen economies aroundthe world were shrinking, many of them trade-focusedemerging markets. In contrast, 2018 is expected tosee only a handful of smaller economies contracting.The United States, Europe, and China are all growingat or above trend rates, and many commodityproducing economies are recovering, aided bygradually rising oil prices. The global economy of 2018looks a lot more balanced geographically.More importantly, in 2017 the industrial side of theeconomy recovered to its strongest growth since2011. And industrial production is expected toremain strong in 2018. As a key driver of global trade,this development was among the most importantfactors underlying the recent double-digit growthperformance of the air cargo industry.Trade quotas andrestrictionsDirectionalimbalancesNew body freightersand lower holdsNew ne marketresearchOpen Skies andnew air servicesagreementsEnvironmentalregulationsAirline marketand shippereducationWorld and regionalGDP growthLack ofairport accessShipperutilizationProliferationof itionAirportcurfews“Just in time”conceptsTerrorism andarmed conflictAir and surfacelabor stoppagesOil and fuel pricesand availabilitySource: BoeingAIR CARGO KEY ECONOMICINDICATORS HAVE REBOUNDEDAnnual growth rates6543210GDPGrowth2016IndustrialProduction Growth2017GlobalTrade Growth2018Source: IHS MarkitA sustained period of good economic growth, togetherwith ongoing accommodative monetary policy, alsoWORLD AIR CARGO FORECAST 2018–2037 10

AIR CARGO INDUSTRY OVERVIEWcreates a stimulus for industrial investment, which canfurther substantiate trade growth. Part of the turnaround in the global economy can be attributed topent-up demand having been filled after a half decadeof timid business sentiment and slow economic growth.Thus, growth rates are not expected to be as stellargoing forward. However, conditions remain favorablefor both GDP and trade to grow near their respective long-term trend rates. Asia-Pacific is expected tocontribute most to growth during the forecast period, atan average annual rate of 3.9 percent. Emerging markets, most of which are witnessing strong middle-classgrowth with more sophisticated consumption patternsand more advanced manufacturing production, will bekey drivers of global trade as well. GDP in Europe andthe United States will grow at 1.7 percent and 2 percent, respectively. They continue to be key sources oftraded goods demand.ASIAN ECONOMIES LEADECONOMIC GROWTHAnnual GDP growth, 2018–2037South Asia5.9%4.8%ChinaEast Asia3.9%Middle East3.5%3.3%Africa3.0%Latin America2.8%WorldOceaniaNorth AmericaRussia and Central AsiaEurope2.4%2.0%2.0%1.7%Source: IHS MarkitThe composition of global trade also helps explain therecent success of air cargo. Trade in goods more likelyto be transported by air saw higher growth rates thanheavy or bulky commodities such as fuel and grains.For example, the computers and electronics equipmentcommodity group, a major source of air cargo traffic,was the fastest growing in 2017. We expect thisgrowth distribution to continue, positioning air cargo tooutgrow overall trade again in 2018—settling in to trendgrowth at a rate of at least 4 percent per year.The economic outlook is not without risk, however. Anaccelerating trade conflict between the world’s twolargest economies, recurring political and financialmarket instability in some emerging markets, andeventually rising interest rates in advanced economieswill pose challenges going forward. However, traderemains the historically proven path to rising livingstandards for many billions of citizens of the emergingworld. The integration of new and increasinglysophisticated economies into the global trading systemwill provide trade growth going forward. The worldmay not witness a boost akin to the ones resultingfrom opening up the eastern world or China joining theWORLD AIR CARGO FORECAST 2018–2037 11

AIR CARGO INDUSTRY OVERVIEWWorld Trade Organization, but assuming a standstill ininternational commerce seems unrealistic. We expecttrade to grow faster than GDP, at 3.4 percent onaverage annually for the next 20 years, providing solidsupport for air cargo demand growth.GLOBAL TRADE HAS REBOUNDED;FORECAST TO OUTPACE ECONOMIC GROWTHAnnual growth in real merchandise trade15%FUEL PRICES, VOLATILITY PRESENTCHALLENGES TO AIR CARGO INDUSTRY10%Triggered by increasing production and decreasingglobal demand, the price of crude oil and jet fuel felldramatically starting in mid-2014. After fuel pricesfell to less than half of the June 2014 price, they haveincreased to more than 80 per barrel (at the time ofthis publication) because of geopolitical conflict anda strong worldwide economy. Crude oil prices areforecast to exhibit volatility and are projected to settleat 60 to 80 per barrel in the next few 21202320252027Source: IHS MarkitFuel is a significant cost element for air cargo carriersand impacts their yields by adding to unpredictability.Therefore, fuel cost volatility is a challenge inoperating air cargo businesses profitably. Operatorstypically shift rising fuel costs to their customersthrough the addition of fuel surcharges, whichcan drive large pricing and yield swings over time.This contributes to market uncertainty, which candiscourage shippers from using air transport. Largepricing swings also obscure efficiencies that airlinesand shippers realize over time, which can concealbusiness operational improvements.Finally, rising fuel costs magnify the inherent costadvantages of ground transport over air transport,and although fuel costs decreased in the 2015–2017timeframe, ground transport managed to retain itscost advantage over air transport.WORLD AIR CARGO FORECAST 2018–2037 12

AIR CARGO INDUSTRY OVERVIEWMODAL COMPETITION IS REAL, BUT AIRCARGO OFFERS UNIQUE, UNBEATABLEADVANTAGESAir cargo represents less than 1 percent ofworld trade by weight, but more than one-thirdby value.WORLD TRADE FOCUSED ONBULK COMMODITIESAir itemsWood products, perishables, automobiles, specialty chemicalsConsumer goods, machinery,textiles, fruits, vegetablesAir cargo is only one part of the global goodsdistribution network. Shippers demand that shipmentsarrive at their destination on time, undamaged, andat a reasonable price, regardless of transportationmode. Different transport modes—road, rail, maritime,and air—can often move the same commodities.But shippers usually have only two choices forintercontinental freight: air and maritime. Maritimetransport offers the primary benefit, low cost, while airtransport offers speed and reliability.Crude oil, petroleum products,LPG, LNG, other liquidsIron and ores of othermetals, coal, grains,cement 1% Air Commodities5% General Cargo13% ContainershipCommodities35% Liquid Bulk47% Dry BulkSource: IHS MarkitThe maritime transportation industry is much largerthan the air cargo industry when measured in tonnesof goods transported. In 2017, the world maritimeindustry carried an estimated 11.6 billion tonnescompared to 61.9 million tonnes for the air cargoindustry. By weight, more than 84 percent of worldmaritime trade is in raw materials and other bulkitems. Most of these commodities, such as oil, metalores, and grains, are low value, not time sensitive, andshipped by sea in specialized tankers or bulk carriers.This maritime trade cannot be directly comparedto the high-value, dry commodities associatedwith transport by air. It is estimated that less than 1percent of world trade tonnage is carried by air cargo,but because of the high value of these goods, theyrepresent about 35 percent of the value of goodsshipped globally.WORLD AIR CARGO FORECAST 2018–2037 13

AIR CARGO INDUSTRY OVERVIEWCONTAINERSHIP TRANSPORTATIONContainership traffic growth has been driven bytraffic diversion from other maritime segmentsrather than air.CONTAINERSHIPS HAVE GROWN BY TAKING MARKETSHARE FROM OTHER MARITIME SEGMENTS12TONNES LOADED(IN BILLIONS)10Containerized cargo is the sector of maritime thatmost closely corresponds to air cargo. While the majority of maritime cargo is bulk and low value, containerships also carry some of the same commodities asair cargo and offer a low-cost transportation alternative for goods that do not require the speed andreliability of air shipment.864201995199719992001Tanker CargoAlthough containership pricing is generally 10 to 20times less expensive than air cargo per unit weight,the transit times are longer and less reliable than aircargo. The goods shipped by air are high value, timesensitive, and perishable, and they require speedand reliability when transported. To continue tocompete effectively with containerships, the air cargoindustry must ensure that the service benefits of airtransportation warrant the price premium charged.Globalization and regional specialization of industry,particularly in Asia, have driven rapid growth incontainership freight flows. Worldwide containershiptonnage in 2017 was estimated to be 1.8 billion tonnes.Containership tonnage has historically grown fasterthan other maritime transportation segments. From1995 to 2017, the containerized cargo tonnage growthrate averaged 7.5 percent annually while tanker cargo,main bulk commodities, and noncontainerized drycargo averaged 2.6, 4.9, and 2.5 percent, respectively.Many of the world’s trade markets have a directionalimbalance, with finished products filling available capacity in one direction and fewer goods being shippedback. This imbalance results in an abundance of returncapacity available at a low price. Taking advantage ofthis situation, many bulk and low-cost goods are beingshipped by containerized cargo instead of bulk maritime transport. Containership growth has been primarily20032005200720092011201320152017Main Bulk CommoditiesNon-containerized Dry CargoContainerized CargoSources: CRSLin transporting these types of products instead of thehigh-value goods shipped by air.New, more stringent regulations related to vesselemissions set by the International Maritime Organization (IMO) for 2020 have the potential to disrupt theglobal maritime sector. That year IMO will introducea global cap on the level of ships’ sulphur emissions,which will be added to the Emission Control Area(ECA) limits already in place. To comply, vessel operators will be required to either use low-sulphur fuels,fit “scrubber” equipment to allow the continued use ofconventional fuel oil, or adopt alternative propulsiontechnology such as LNG-fueling. According to Clarksons Research, less than 2 percent of the currentglobal merchant fleet in vessel number terms (andless than 3 percent of the world containership fleet)is currently able to meet this forthcoming emissionsstandard without switching to compliant low-sulphurfuel, although the proportion of vessels on order ableto do so is much larger (more than 20 percent of theworld fleet). There remains significant uncertaintyas to how the industry will meet this challenge overtime or whether IMO will eventually provide any relief.However, if a hurried effort to upgrade existing vesselsWORLD AIR CARGO FORECAST 2018–2037 14

AIR CARGO INDUSTRY OVERVIEWensues or compliance is enforced, this disruption mayprovide a temporary boost to world air cargo traffic.ACMI PROVIDERS TRANSPORT ABOUT 5.2%OF WORLD AIR CARGO TRAFFICTYPES OF AIR CARGO SERVICE VARY TOSERVE DIFFERENT AIR CARGO MARKETREQUIREMENTSGeneral freight carriers transport a large portionof total world air cargo. Carriers in this category(all cargo airplane operators, combination carriers,and passenger airplane lower-hold carriers) areresponsible for more than 80 percent of world RTKs.These carriers are integral to the global supply chainworldwide and generate 57 percent of total air cargoindustry revenues.16RTKS (IN BILLIONS)General freight carriers11.3% Average Annual Growth12840199219972002200720122017Source: US DOT, Airline data, BoeingLarge widebody freighter ACMI servicesLarge widebody aircraft, crew, maintenance, andinsurance (ACMI) providers have seen volatile trafficvolumes since the global economic downturn, andwith the recent strong performance in air cargo,ACMI providers were maintaining about 5 percentof world air cargo traffic at the end of 2017.ACMI providers, also referred to as wet-leaseproviders, offer cargo operators the flexibility to obtainlift on a trial basis, augment existing markets, andprovide service in markets that are highly seasonal—all with no capital equipment investment required.Large freighters in long-haul markets account forthe most significant segment of the air cargo ACMIbusiness. The ACMI business is sensitive to changesin the overall air cargo business, but it has been anestablished industry subsector since the early 1990s.ACMI providers have maintained approximately a 4 to6 percent share of total world air cargo traffic for thepast decade.WORLD AIR CARGO FORECAST 2018–2037 15

AIR CARGO INDUSTRY OVERVIEWInternational expressInternational express traffic continued to growfaster than the average world air cargo growth rate,expanding 4.5 percent in 2016 and 11.5 percent in 2017.INTERNATIONAL FREIGHT AND MAIL, INTERNATIONALEXPRESS HAD STRONG GROWTH IN 2017Express share of international air cargo was 17.1% in 2017The distinction between express and general aircargo continues to blur. Tradition

transformed business and consumer buying behavior. In 2017, global retail e-commerce sales were 2.3 trillion, more than double the 1.1 trillion spent in 2012. With no signs of slowing down, 2018 is set to be another strong year, with more than 2.8 trillion in sales. While e-commerce i