World air cargo down 3% in June as Asia slows

Post-tsunami supply chain disruption in Japan and slower economic growth in China hit world aircargo traffic last month, contributing to a 3% decline that left half-year growth at a low 1.2%,

June world air cargo was down 3% in freight tonne kilometres (FTKs) while available capacity was1.9% higher, according to the monthly data for international and domestic freight. This combinationwill have pushed down airline cargo load factors.

Over the first half of 2011, total air freight grew just 1.2%, with international demand up 1.7%but domestic volumes down 2.2% on a year-on-year basis. Total capacity was 5.9% higher, withinternational capacity up 7.6%, IATA figures showed.

“Compared to May both passenger and cargo markets contracted by about 1%. Air cargo continues inthe doldrums at 6% below the post-recession peak,” commented Tony Tyler, IATA’s new DirectorGeneral and CEO.

Freight volumes have not grown since July-August 2010, according to IATA. May 2010 was thepost-recession re-stocking peak, compared to which the June 2011 international freight market was6% smaller, it pointed out.  “While world trade is expanding at 7% a year, the benefit isbeing realised more by modes of transport other than air,” IATA said. Most world regions now havelower air freight volumes than last year, it added.

In regional terms, Asia Pacific carriers, the biggest players in the air freight market with a40.5% market share, also recorded the largest year-on-year decline with a 5.8% demand drop. Thiswas mainly attributable to disrupted supply chains for the electronics and auto industries in thewake of the Japanese tsunami and earthquake and also slower economic growth in China. But thestrength of the region was shown in the maintenance of the highest load factors (58.6%) well aheadof the 45.7% industry average for the month.

European carriers posted a 1.3% decline and North American carriers recorded a decline of 3.0%compared to June 2010 levels. Carriers in the Middle East, Latin America and Africa showedyear-on-year growth for June, recording demand increases of 3.7%, 2.8% and 0.3% respectively.

Looking at the airline industry’s overall profitability, Tyler said: “The industry is living inseveral different realities. With high load factors and an upward growth trend, the passengerbusiness is doing better than cargo. But regional growth patterns are shifting. The Middle Eastcarriers have moderated to a single digit expansion and tighter economic conditions have slowedChina’s growth. Meanwhile, Latin America is leading the industry expansion followed by Europe whichis growing strongly despite its currency crisis. And North America is underperforming the industryon growth but leading on load factors.”

He added: “What is clear is that the rising jet fuel price is putting pressure on the bottomline. The average price for the second quarter was $133/barrel which is an increase of $10 over thefirst quarter. With an expected profit margin of only 0.7%, the ability of airlines to recoup thiscost is critical to staying in the black for the year. Slower economic growth makes thesechallenges all the more difficult. It is certainly not the time to burden the industry withincreases in other costs, including taxation,” he said.

IATA is forecasting an industry profit of $4 billion for 2011 which is a 78% fall from the $18billion that the airlines made in 2010. On anticipated revenues of $598 billion, this translates toa net industry margin of 0.7%. Based on a forecast average oil price of $110/barrel for 2011 and ajet fuel price of $126.5/barrel, the industry fuel bill is expected to be $176 billion whichaccounts for 30% of costs.