Prospects for the international air cargo business are now better than at any time for the pasttwo years thanks to higher load factors and rising yields, IATA said in its Q2 cargo trends report
published this week. The express sector will continue to benefit from this trend.Load factors are back to pre-9/11 utilisation rates, yields are rising and the threat of acapacity surge appears to be diminishing, the airline association wrote. Cargo profitability isback to pre-recession levels in the USA and heads of cargo report a high level of confidence. “Risks and geographical differences remain, but the overall situation for the air cargo businesslooks better than it has done for two years,” IATA commented.
The world economy is now expected to grow 4% this year, according to the IMF. Asia, andespecially China and India, will be the world’s “growth hotspots” but South America and the MiddleEast are also expected to grow about 4-5%. Prospects for the US economy are improving but Europe isforecast to be the weakest economic region this year, IATA said.
International air freight volumes are growing strongly at more than 20% in most world regions,with only a temporary interruption due to the Europe airspace closures in April. Asia is drivinggrowth with strong double-digit growth in revenues and volumes, the quarterly report showed.
Airlines are seeing a strong recovery in revenues, volumes and load factors, according to theIATA report. Cargo revenues rose about 30-40% in the first quarter, although the severe fall inearly 2009 means revenues are still 5% below pre-recession levels. Average cargo yields were up 15%on Q1, 2009, and 20% higher than the low seen in Q2, 2009, but were still down on pre-recessionlevels.
In terms of capacity, load factors improved to nearly 56% in April. With stable worldwide fleetnumbers and fewer deliveries planned for the rest of this year, the outlook for capacityutilisation is better, IATA said.
The first part of the recovery cycle when air freight rises at a much faster pace than worldtrade, as shippers shift from ocean to air, appears now to be over, IATA pointed out. Ocean freightis now fully competing in the recovery with 20% volume increases and 50%+ yield gains. All oceantransport modes now show that world trade was rising very strongly during the first quarter of2010. “However, it is promising for air freight growth that this has occurred through overall worldtrade accelerating rather than air freight slowing. Considerable momentum appears to remain for thenear term,” IATA declared.
On the demand side, shipper confidence rose to very high levels in April and the keysemi-conductor sector continues to expand shipments at more than 50%. This indicates strong freightgrowth over the next few months. But the end of the business inventory cycle will put a brake onfreight growth in the second half of this year, IATA warned. Looking ahead, IATA highlightedsurprisingly strong business investment intentions for the coming months. But consumer confidenceand spending remains very mixed around the world, with better levels in emerging economies than indeveloped countries.
In terms of costs, jet fuel prices have slipped back towards $80 a barrel in recent weeks. Butthe $88 average for jet fuel and $78 average for crude oil so far this year are still considerablyhigher than fuel prices in early 2009. The rising trend slowed as economic uncertainty rose but theeconomic environment does not look likely to support much weaker fuel prices, IATA wrote in itsanalysis.
Profitability in the air cargo business is also improving. US cargo airlines saw theirprofitability return to pre-recession levels in Q4, 2009, while confidence in future revenuesremains strong. “Much of the improvement in profits took place on the Pacific segments of mostairlines, reflecting the strong economic growth and freight demand being generated by theseeconomies. Airlines in the Asia-Pacific region are likely to be seeing at least an equivalentimprovement,” IATA concluded.
