The Air Cargo outlook: trends, opportunities and threats

1. The Air Cargo outlook: trends, opportunities and threats Michael Vorwerk – President CNS April 2011 Health and Personal Care Logistics Conference / Spring 2011 www.iata.org/economics

2. IATA Introduction • Founded in 1945, the International Air Transport Association (IATA) is the industry’s global trade association • With 225 members in more than 130 countries, IATA represents 93% of international scheduled traffic • IATA’s mission is to represent, lead and serve the air transport industry • IATA delivers standards and solutions to ensure successful air transportation

3. Introduction • Cargo Network Services Corp. • Established in 1985 to support the Air Cargo Industry in the USA • Located in Miami • Key Services • CASS USA & e-billing • Agent Endorsement Program • Global Cargo Agenda Implementation • Industry Statistics • Information & Distribution services • Partnership Conference

4. Introduction continued • I • A m • N ot • A n • E conomist

5. I’d rather talk about ….Did you know? • Every fifth drug is temperature-sensitive • 20% of the world’s best selling pharmaceuticals are temperature sensitive • $ 130 billion of the total pharmaceutical market ( about $ 650 billion ) is represented by temperature sensitive products • The share of temperature-sensitive products will rise the next yearsBiological’s + 15 %Chemical based + 10% • Nearly 100 % of all vaccines and 68 % of all products sold by biotech companies need to be stored and transported between 2 to 8 ºC • 43 % of all diagnostics and about 11 % of all products from large pharmaceutical companies have to be handled with the same precautions • There is a correlation between product price and temperature-sensitivityand that some biological’s, vaccines and hormones can reach a package price of up to $ 6000.- or you can fill a LD3 Container with up to $ 20 million of product value.

6. Industry Overview “Prediction is very difficult, especially about the future” Niels Bohr

7. Squeeze on cargo profits started late 2010 Source: US BTS

8. Heads of cargo confidence losing altitude Source: IATA

9. Travel markets strong trend but cargo? Source: IATA

10. Coincident indicators have slowed sharply Source: IATA, SIA

11. Boost from business restocking is over Source: IATA, Haver

12. World trade rising rapidly once more Source: IATA, Netherlands CPB

13. Business is spending on capital goods Source: Haver

14. Mixed picture for the consumer Source: Haver

15. Leading indicators very positive Source: IATA, JP Morgan/Markit

16. Business travel market remains strong Source: IATA

17. Europe’s economic situation remains grim Source: Haver

18. But optimism over ‘emerging’ markets Source: EIU

19. Rising oil price is the major threat this year Source: Platts, Bloomberg

20. Fuel prices will squeeze airline profitability Source: IATA

21. Despite Economic DevelopmentAirfreight always has a future Ongoing Airfreight Drivers Current Airfreight Suppressors Diversion to other modes: Shift of lower value items to sea / road / rail freight Demand for low cost products: Consumer demand shifting to low cost products to preserve purchasing power Further structural change: Only likely to occur if economical and/or regulatory environment will considerably Wage Disparity: Low value work moving to low cost production areas Maturing Markets: As emerging economies mature consumers demand more imported goods SpecialProducts: Live Animals, Perishables, Pharmaceuticals, & Valuables = Airfreight Emergency Shipments: Rapid recovery from breakdown or crisis situations Speed to Market: Protecting innovation from competitors Capital Costs: Reducing inventory costs in the supply chain through faster delivery Just In Time: Reducing inventory volumes & costs by destocking the supply chain

22. This sums it up REGULATORY CONSTRAINTS Source: Adapted from The Economist

23. Thank-you Any Questions?