By Karen E. Thuermer, AJOTWhat a year this has been for the air cargo industry! Topping the worry list were skyrocketing fuel prices, terrorist threats, airline bankruptcies, and fuel surcharge scandals, not to mention the usual imbalanced trade lanes across the Pacific and the dog-eat-dog competition among air carriers. Without a doubt, the air cargo industry faced its share of bumps and bruises in 2006. Next year may not be any better. Air carriers will most likely still be strapped with high fuel prices—an issue deemed the most critical by air cargo executives. The threat of terrorism is not expected to go away either. In fact, security will become increasingly important and contentious as the US Congress takes a closer look at air cargo security and the possibility of requiring all shipments be screened. Even air carrier manufacturer Airbus has thrown a wrench into projections by announcing critical delays to its A380. Carriers around the globe, expecting to increase capacity in competitive trade lanes by using the mammoth aircraft, are now scrambling for alternatives. Not to worry, however. The mood in the industry remains cautiously optimistic. In fact, future projections are downright upbeat. A look at Boeing’s World Air Cargo Forecast 2006/2007 indicates that world air cargo growth is expected to expand at an average annual rate of 6.1% during the next two decades, with a three-fold increase in worldwide air freight. Contributing to the growth will be increases in international trade, more liberalization of air services and improving technologies. New aircraft that will either replace or be added to fleets will give carriers a boost by increasing lower hold capacity and operating more cost effectively. According to the Forecast, Asia-North America trade lanes will average 7.1% growth, and Europe-Asia, 6.9% growth. It is no surprise that Asian air cargo markets are expected to exceed forecasts of two years ago, with the domestic Chinese and intra-Asian markets expanding 10.8% and 8.6% per year, respectively. Driving that growth is increased service and new airports that have blossomed throughout China. “Air cargo markets linked to Asia will continue to lead other markets through 2025, led by the highest growth in intra-Asia and domestic China traffic,” says Nicole Plasecki, vice president, Business Strategy & Marketing, Boeing Commercial Airports. The North America and intra-Europe air cargo markets are expected to grow more slowly, as are routes involving Latin America and the Middle East. The Forecast calls for Europe-Southwest Asia to experience slightly higher than average growth at 6.2%. Global impactEconomic development, the continuing trend to outsource manufacturing to low-cost nations, and between worldwide economies that have resulted in increased in global trade have contributed heavily to China’s continued enormous growth coupled with that of emerging markets such as Russia, Vietnam, Mexico and Brazil. With much more of the world engaged in manufacturing and global trade, carriers are facing unprecedented growth opportunity. To meet shippers needs in the United States, US carriers continue to vie for slots in China’s market to connect to markets they serve. Last year, Continental Airlines began offering direct service from Newark to Beijing. The service became the only flight operated by a US carrier linking Mainland China with New York and connecting points throughout the United States, Europe and Latin America. The service complements Continental’s existing Boeing 777-200 service to Hong Kong. How much capacity is serving a trade lane, however, impacts space availability and the rates carriers charge. Capacity has a direct impact on yields. Continental serves more international destinations than any other US carrier and provides cargo service to 23 destinations within the Asia and Pacific region. American Airlines (AA), which only hauls cargo in the belly hold of its passenger flights, began servicing Shanghai with 777 daily