Air Cargo Demand Decline Slowing

May 28, 2009
Compared to April 2008, airline passenger demand fell 3.1% and cargo was off 21.7%.

While April’s 3.1% passenger demand drop was a clear improvement compared to the 11.1% fall in March 2009, this improvement should be viewed with caution, says the International Air Transport Association (IATA). Easter holidays, which fell in the month of April, positively skews the data by at least 2%. Traffic gains were at the expense of yields in most regions. And preliminary data for May 2009 suggest a renewed double digit decline, at least for European airlines.

Freight demand appears to have found a solid floor with a fifth consecutive month at more than 20% below previous year levels.

“We are not out of the woods yet,” said Giovanni Bisignani, IATA’s director general and CEO. “The demand improvements that we saw in April are welcome. But the 3.1% decline in passenger demand still outstripped the 2.5% cutback in capacity. There is no improvement in revenues as yields continue to fall. And freight remains at shockingly low levels. The worst may be over. However, we have not yet seen any signs that recovery is imminent,” said Bisignani

Air freight continues at very weak levels. International cargo was down 21.7% in April compared to previous year levels. This is the fifth consecutive month in the -20% range. This sideways progression may indicate that we have seen the worst of the economic downturn, said IATA. Business confidence is improving, but inventories remain high. Until inventories adjust to more normal levels, air freight volumes will likely continue to bounce along the bottom.

Carriers in all regions showed double digit declines. Middle Eastern carriers were the strongest performers at -11.1%. European, North American, Asia-Pacific and African carriers had similar performance of -23.3%, -22.4%, -22.3% and –18.8% respectively. Latin American carriers were the worst performers at -24.2%.

“With each day of the recession, the challenges for the air transport industry are mounting. Flexibility has never been more important. But there is not enough of it. Airlines remain constrained by old rules that restrict basic commercial freedoms such as access to markets and capital. Much of the cost base remains out of our control—from volatile fuel prices to monopoly infrastructure charges. And many governments simply don’t understand the need for urgent change. We need a change in mindset. To manage through this ongoing crisis, every player in the air transport value chain must be prepared to drive change,” said Bisignani.

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