The International Air Transport Association (IATA) has issued a gloomy air freight forecastexpecting a decline in cargo profitability and only a moderate traffic increase over the next 12
months with slowing growth in the third quarter of 2012.With stagnating air freight demand, declining yields and soaring oil prices during the firsthalf year of 2012, air cargo profitability has experienced a downward pressure during this year’sthird quarter. Business confidence declined reversing the upward trend observed earlier this year.But world trade continues to expand, although at a slower growth rate, the association said in itsnewly-published Q3 2012 Cargo E-Chartbook.
In the beginning of the second quarter, air freight yields started to improve but then declinedover recent months. The slightly improved air freight demand earlier this year had a positiveimpact on profitability. But with stagnating recovery and excess capacity, yields experienced adownward pressure once again, IATA pointed out.
Although freight load factors stabilised in the first half of 2012, aircraft utilisation hasbeen declining. “The trend is set to continue, with deliveries of new twin-isle aircraft with bellyhold capacity set to increase by over 70% in 2012 compared to 2011, expanding the existing widebodyfleet by 6% in 2012. Air freight rates, which have been declining since early 2011, continue to beunder downward pressure,” the association stressed.
After air freight demand declined from the second quarter of 2010 until the end of last year,there were signs of a minor recovery in the first quarter of this year but growth was rather seenon smaller markets than on major trade lanes.
The demand drivers have also weakened and consumer confidence fell in China, the USA andespecially in Europe, with depressed demand for air-freighted commodities like semi-conductors. Inaddition, capital investment from Japanese and UK companies went down and flat inventory to salesratios indicate that businesses are sticking to deferred delivery solutions with “no immediate needfor transporting cargo quickly”.
In line with the worsening air cargo outlook, global economic growth is expected to be just over2% in 2012 which is slower than last year with different parts of the world affected in differentways. While the economies of the Euro zone are expected to contract this year, US growth isexpected to improve compared to last year, and so is Japan.
“Western economies continue to be limited by tightening fiscal policy, and US and European bankshave stopped loosening lending standards, reducing the risk of another banking crisis,” IATAfurther explained. “Growth in emerging markets continues to significantly outpace Westerneconomies, with robust expansion anticipated throughout Asia Pacific, MENA, Sub-Saharan Africa andLatin America in 2012.”
The downward pressure on profits also comes from surging jet fuel prices after a short declinein June since prices first rose to about $120/barrel almost two years ago.
All these factors contribute to a rather pessimistic profitability outlook, with cargo yieldsexpected to go down over the next year and traffic to increase only modestly, according toexecutives working in the cargo industry who were surveyed on the subject in July 2012. “This isconsistent with declining business confidence and slowing growth in world trade in some regionsover recent months,” IATA concluded.
