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Asian freight volumes bottom out, or is it just a plateau ahead of more falls?

26-Mar-2009

Asia Pacific freight volumes (FTKs) were down a stark 23.1% in Feb-2009, according to the Association of Asia Pacific Airlines (AAPA). But it was the best result in three months - and could suggest either a bottoming out in the crucial air freight segment, or a plateau ahead of further declines.

Asia Pacific international cargo traffic growth and cargo capacity growth: Mar-08 to Feb-09

Global equity markets have rallied over the past two weeks, as investors welcome signs the US economy could finally be turning - or it could just be another bear market rally.

Two key pieces of data from the US economy on 25-Jun-09 (housing market and manufacturing output) lend support to the cautious optimism that is returning to global markets.

The Commerce Department reports factory orders for goods including metals, machines and military equipment rose unexpectedly in Feb-2009 by 3.4% after a 7.3% decease the previous month. The market had expected a 2.5% decline. The Commerce Department also reported sales of new single-family homes rose 4.7% in Feb-2009 - much better than the market was expecting.

Air freight bounce expected, but...

IATA this week stated that as manufacturers end their de-stocking of inventories (that caused the crash in Asian exports and air freight shipments over the New Year period), there should be a "modest bounce in air freight, as component shipping rises a little".

But the industry body warned that weak consumer and business confidence "is expected to keep spending and demand for air transport low". IATA added, "the prospects for airlines are dependant on economic recovery [and] there is little to indicate an early end to the downturn".

Outlook: Glass half empty or full?

We therefore sit at an interesting juncture. The Obama Administration has been attempting to stoke consumer confidence by talking up recovery lately.

The glimmers in the gloom in the stream of economic data have been seized upon by investors lately, but it is still too early to call an end to the downturn.

Well placed airline industry commentators, such as IATA and AAPA, remain gloomy.

Commenting on the Feb-2009 data, AAPA Director General, Andrew Herdman, stated the aviation industry faces "a deepening crisis, with further sharp falls in passenger demand forcing airlines to make additional cutbacks in capacity and undertake related measures to bring costs more into line with dramatically reduced revenues".

Taken together, the first two months of the year saw AAPA international passenger numbers fell by 10.5% compared to the same period last year.

Asia Pacific international passenger traffic growth and passenger capacity growth: Mar-08 to Feb-09

Load factors are easing (by 4 ppts to 71.9% in Feb-2009), as AAPA airlines have failed to cut capacity quickly enough, while demand for premium services remains particularly weak, as companies seek to reduce costs including travel budgets. "Many businessmen are now flying economy", according to Mr Herdman.

Asia Pacific international passenger numbers growth and passenger load factor: Mar-08 to Feb-09

Mr Herdman concluded, "we can only hope that, once this process has run its course, we may see some signs of a modest recovery in cargo volumes, albeit at levels still significantly down on last year."

The Centre will closely watch the March freight reports from the world's airlines and airports for signs of further recovery. Stay tuned to Asia Pacific Airline Daily and Airport Business Daily for these crucial daily developments.


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