Australia’s economy is 12% larger today than it was in 2018. Yet Australian air cargo imports are about 8% below October 2018 peak and about 15-20% below the long-term trend. Exports are 25% below the March 2019 peak. Meanwhile, container volumes are about 6% higher. The share of total non-bulk trade has generally hovered around 30% of total trade but dropped to 26% in the most recent 12 months. However, since mid-2023, both air cargo import and export traffic have been improving. E-commerce and more capacity could lead to a recovery of inbound and a resumption of lost Chinese demand in a recovery of exports.
Air Cargo Traffic and Trade
Between 2000 and a peak in 2018, Australian air cargo imports grew by around 3% per year. Since then, the market has been volatile. Air cargo exports hardly grew between 2003 and 2013 but expanded by 10% per year between 2014 and 2019. This increase was largely driven by perishable exports to China, as was the subsequent drop following import restrictions imposed by China on Australian goods. Import traffic reached its most recent low point in July 2023 while exports have been growing again since April 2023.
While the commodity mix of outbound air cargo continues to consist largely (about 75%) of meat, fish and other perishable products, inbound air cargo volumes are increasingly driven by small package traffic. Customs statistics do a poor job of tracking this type of traffic as they fall under the A$1000 threshold for a full customs declaration and are not tracked in normal customs statistics collected and disseminated by the Australian Bureau of Statistics. The chart below shows the increasing gap between airline reported traffic (which contains all types of consignments) and customs reported weight (which contain only import and export consignments greater than A$1000 and A$2000, respectively)
While export traffic and trade have moved in sync, we have been observing and increasing gap between inbound air cargo traffic and trade weight reported by customs.
E-Commerce Changing the Mix of Import Volumes
The biggest driver has been cross border e-commerce consignments subject to a simplified customs regime (and are reported through self-assessed clearance declarations – SACs). We estimate that this type of traffic accounts for about 15,000 – 17,000 tonnes of air cargo per month and accounts for approximately 30-35% of total inbound air cargo volumes. This traffic has been growing at 24% per year, with an acceleration of growth in the most recent year.
Based on goods and services tax data collected by the Australian Taxation Office (ATO), this trade was worth about $A2.6 billion in the most recent financial year. This equates to a value of about $30 per shipment.
*Note: From 1 July 2018, GST was applied to low-value imported goods.Non-resident businesses that report and pay GST under a Simplified GST system are considered limited registration entities.
Most of this traffic moves by express or general air, with the United States and China being the most important origins. The share of China as a primary origin dropped during the COVID years but has bounced back as capacity has returned to the market.
Current year data indicates continued strong growth of China to Australia e-commerce traffic.
Air Cargo Capacity
Australian air cargo traffic is highly dependent on the availability of belly cargo space on passenger flights. On a global scale about 50% of air cargo generally moves on freighters, but in Australia only about 15%-20% of air cargo traffic is regularly carried on freighters. Pre-COVID about 3-4% of total international aircraft movements were on all cargo aircraft. This changed between 2020 and 2022 with a large-scale loss of regular passenger capacity. The market has largely normalised. With the exception of express companies such as DHL, FedEx and UPS, most combination carriers only deploy limited freighter capacity to Australia.
Air Cargo Outlook
The Bureau of Infrastructure Transport and Regional Economics (BITRE) recently published a long-term forecast for both import and export air cargo traffic. BITRE expects import traffic to resume a growth trend of about 2.2% per annum but exports to exhibit only moderate growth of 0.3%.
Airbus’ global market forecast published in July is more optimistic on both imports and exports. For exports, Airbus expect moderate growth of 0.5% per annum for the next five years to Northeast Asia (excluding China), and higher rates to the Gulf (1.9%), China (1.7%) and Southeast Asia (2.4%). On the import side, Airbus expects strong growth from China (4.9%), Southeast Asia (3.6%) and more moderate growth from Europe (2.0%) and the US (2.6%). Both import and export airfreight volumes from South Asia are expected to increase by 6-7% per year, but off a much smaller base.
Our own analysis shows low correlation between Australian airfreight imports a few variables including retail, consumption, gross domestic product and even overall trade. The typical correlations observed at a global scale do not seem to hold true for the Australian market. Export growth potential is more driven by individual markets such as China and also does not correlate well to key economic indicators (both on the import as well as export side).
The tables below provide an overview of current, peak and gap air import and export weight with key trading partner regions. Note that these figures refer to import and exports consignments worth at least A$1000 and A$2000, respectively. This excludes more small package traffic.
The case for an imminent recovery of Australian air cargo exports is easier to make than imports as most of the volume loss relates to China. The recent resurgence of Australian wine exports to China are a good example of how quickly this particular market can bounce back if trade relations improve.
While small package traffic continues to provide some compensation for lack of general air import growth, making a case for a return to trend of air cargo imports is more difficult. One key underlying trend is that over time air has become relatively more expensive as a mode. From 2010 the cost of moving a kg by air has grown from 15 times the cost of moving a kg by ship to about 22 times today. This explains why in the longer-term air imports have underperformed relative to container shipping.
Higher container handling costs at Australian ports or a long-term increase in the cost of ocean freight could change this ratio and ultimately benefit air freight. As passenger capacity into Australia increases this could also bring down the cost of air cargo and increase its relative advantage.