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Jade Cargo suspension reflects trend of slowing air freight demand & pressured freight profitability

Analysis

The business environment for air cargo has continued to weaken in 4Q2011, with IATA in its 4Q2011 Cargo E-Chartbook labelling the outlook for freight profitability as "pessimistic" and the revenue outlook as "weak". This has occurred amid declining cargo rates, which has placed downward pressure on yields and revenues, while costs have remained high, despite some recent relief from declining jet fuel prices in Dec-2011 and reduced labour costs.

Reflecting pressures in the cargo market, Jade Cargo International on 31-Dec-2011 announced the temporary suspension of its services "due to overall weak air cargo demand". The carrier added the suspension of service will "provide the shareholders with an opportunity to coordinate with stakeholders to continue with the restructuring of the company's financial structure". As a result of the suspension, the carrier's six Boeing 747-400ERFs aircraft have temporarily been grounded. According to reports in Boersen Zeitung, Jade Cargo no longer has the funds to purchase fuel for its six 747 aircraft. Lufthansa Cargo stated the company "believes in the future" of Jade and "hopes to find a solution in the next few weeks".

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