# Presentation: 730929

## Rakesh Shalia
Manager – Strategic Market Analysis
March 18, 2005

**Manager – Strategic Market Analysis**
**March 18, 2005**

**30th Annual FAA Aviation Forecast Conference**

**Coping With U.S. International **
**Air Cargo Trade Imbalance**

## U.S Trade Deficit

-  U.S. annual goods deficit has been increasing since last ten years.
-    In 1995 the goods deficit was 13 % and in 2004 it was 29.2 %

- Data Source: Commerce Department

## U.S Air Trade Imbalance

-  During 1995 there was no issue about air trade imbalance
-  In 2004 the trade imbalance ratio (Import/Export) was 1.5:1 leading to significant
-    network planning issues.
-   Since imports tend to be lighter than exports, the container imbalance is even higher.

- Data Source: Commerce Department

## Air Trade Imbalance: U.S. International Lanes

-    South America was 1.9
-  In last two years the trade imbalance declined on US-EU lane
-  In 2004 the trade imbalance increased on US-Asia lane

- Data Source: Commerce Department

## Countries Contributing to U.S. Air Trade Imbalance

-    China significantly contributes to U.S. international air trade imbalance

## The trade imbalance/deficit is primarily driven by several macro 

- economic factors:
-   Economic activity (GDP) in US & other regions
- (US Economy spends more than it produces)
-   Interest rates between countries
-   Exchange rates
-   Business outsourcing
-   Oil prices

- Factors Causing Trade Deficit

##   The weakening of US dollar improved the US exports, 

-     primarily to Europe, thereby reducing the trade imbalance
-   The US deficit with China was up 30.5% from last year and
-     was the largest imbalance recorded with a single country
-   Pegging of Chinese Yuan to US dollar may have contributed
-     to trade woes
-   The gap has been increasing due to increase in oil prices.
-     However, in Dec'04 the gap narrowed due to slide in oil
-     import prices

- Regional Factors Impacting Lane Imbalance

##  Air Networks are getting constrained in one direction 

-  Air cargo carriers have no trouble in filling their U.S.
-    inbound flights with high-value cargo like electronics and
-    consumer goods.
-  US outbound flights achieve lower yields and load
-    factors, offsetting some of the profitability of the return
-    flights.
-  Cannot introduce additional capacity on round trip basis
-    since the flights are not profitable

- Trade Imbalance Issues for Air Cargo Carriers

##  Introduce round the world flights to maintain the optimum 

-    load factors.
-   In March'05, FedEx launched new westbound around-the-
-    world flight
-  This is the express cargo industry's first direct
-    connection between mainland China and Europe
-  Improve cargo densities on the constrained legs
-  Yield management based on network capacity
-    optimization

- Coping Strategies of Air Cargo Carriers

##  Develop partnerships in US to boost exports

-   The Commerce Department’s U.S. Commercial Service (USCS) has partnered with FedEx to provide ongoing support to Commercial Service efforts aimed at boosting exports from U.S. small and medium-size businesses.
-  FedEx will inform its customers about the benefits of the USCS worldwide export assistance network of 108 domestic offices and 149 posts in 78 countries that provide export assistance

- Coping Strategies of Air Cargo Carriers

##  Integrators are expanding their product portfolio and 

-    providing supply chain management & value added
-    services
-  Develop other modal options like ocean, road, and
-     rail, etc.

- Coping Strategies of Air Cargo Carriers

## ?

- Questions