2011 will produce a split in the air freight market not seen in the 60-plus-year history of the industry. Airlift will be tight, with rate hikes in almost all U.S. trading routes.
But for the single most important U.S. trading partner, China, excess capacity will rule and rates will soften.
Why this split? The Chinese market, although vast, is also a shifting and tricky one. Hypnotized by the size of the Chinese market, transportation companies such as FedEx, UPS and the big multinational forwarders have poured billions of dollars into establishing routes into China and establishing facilities there. Slowing growth in China, combined with that government’s determination to make the nation self-sufficient in manufacturing products from automobiles to computer equipment, will create excess capacity in that market.
China, with its huge trade surplus helping to prop up the dollar, also will increasingly turn away from purchasing U.S. Treasury notes. Instead, China is acquiring “hard” assets such as minerals, iron ore and oil to feed its own production facilities.
U.S. trade to other parts of the world will flourish. The dollar will remain low -- with two important consequences. The low dollar will stimulate exports and will hasten the return home of a growing number of manufacturing facilities. Foreign nations always have respected the quality of American-made goods. When the dollar was strong, it often was too expensive for foreign nations to import U.S. goods. With the dollar not so mighty, a wide range of exports will be competitive for the first time in half a century.
Air freight will benefit from this surge in exports, with heightened capacity and rising rates.