Air cargo still turbulent

Global - International air cargo does not look to be recovering, with the sector recording a 16.5% slip in June from the same month a year earlier, a moderate improvement over the 17.4% decline in May, said the International Air Transport Association (IATA).

The utilisation of air freight capacity on international routes remained extremely weak, however, at 47.3% due to unbalanced trade flows with Asia and some market share loss to ocean transport.

Asia Pacific airlines reported a 15.8% drop in international air freight in June. While weak, this is an improvement compared to the 18.1% fall in May. The IATA believes the gain reflects improving economic conditions in some emerging Asian economies like China.

Passenger traffic saw a slight improvement in June, at a slip of 7.2% instead of May's 9.3% fall. The capacity adjustment of -4.3% did not keep pace with the fall in demand leaving average fares and yields under significant pressure. As a result, June revenue on international markets fell by a shocking 25-30%.

"International passenger demand remains very weak," said Giovanni Bisignani, IATA's director general and CEO. "While it appears that there is stabilization in some markets, this comes at a steep price. Capacity cuts have not kept pace with demand falls. Even with lower fares, the load factor remains 2.3% below last year's levels. Airlines are seeing international revenue falls of up to 30% at the start of the busy June-August period when airlines traditionally make their money. The outlook remains bleak," said Bisignani.

Bisignani said the outlook for airlines remains turbulent, and does not see signs of an early economic recovery. Risks like rising oil prices and the impact of Influenza A (H1N1) have impacted demand, and are likely to continue.

"Cash flow is threatened by weak demand, exaggerated by fare discounting. And, after years of cost reduction, the scope for further cuts is limited. Flexibility is critical in finding new sources of capital and new markets. This crisis highlights the need for governments to replace outdated restrictions on ownership and market access with modern commercial freedoms. Quick action is needed," said Bisignani.

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