IATA: Pressure on air cargo to continue

IATA stated (22-Dec-2011) the business environment for air cargo continued to decline in 4Q2011 with declining business confidence to keep a downward pressure on volumes and yields. Details include:

• Economic outlook: Banks have started to reign in their lending propensity as lack of debt resolution in the euro zone continues. As is to be expected, governments made further cuts to expenditures, despite suboptimal growth levels;
• Traffic growth: Air cargo growth rates started to fall in the middle of 2011, after a period of insignificant growth. The last quarter has been no different, with all major routes declining further;
• Demand environment: Customers of the air freight industry have continued their pessimistic outlook and cut cargo further. Although there is no obvious inventory overhang, pessimistic expectations are driving the need for air freight down, with purchasing managers confidence index indicating no growth prospects;
• Revenue and yield: Cargo rates have continued their decline in an unsupportive economic climate. Downward pressures on revenues have persisted, with some regions suffering more than others. The revenue outlook looks weak;
• Capacity: Freighter aircraft are being reduced, but the increase in twin aisle aircrafts in more than offsetting that reduction, keeping cargo capacity high. Large deliveries planned for 2012 will exacerbate that condition;
• Profitability: Cargo profitability began to fall in the second half of 2010 and declined further this year. Although about 50% of airlines are meeting and exceeding their cost of capital, the results are passenger and seasonality driven, as heads of cargo indicate a much less confident outlook. [more - original PR]