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

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

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

Introduction continued A m N ot A n E conomist

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 years Biological’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-sensitivity and 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.

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

Squeeze on cargo profits started late 2010 Source: US BTS

Heads of cargo confidence losing altitude Source: IATA

Travel markets strong trend but cargo? Source: IATA

Coincident indicators have slowed sharply Source: IATA, SIA

Boost from business restocking is over Source: IATA, Haver

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

Business is spending on capital goods Source: Haver

Mixed picture for the consumer Source: Haver

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

Business travel market remains strong Source: IATA

Europe’s economic situation remains grim Source: Haver

But optimism over ‘emerging’ markets Source: EIU

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

Fuel prices will squeeze airline profitability Source: IATA

Despite Economic Development Airfreight always has a future Ongoing Airfreight Drivers Current Airfreight Suppressors Wage Disparity: Low value work moving to low cost production areas Maturing Markets: As emerging economies mature consumers demand more imported goods Special Products: 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 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

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

Thank-you Any Questions?