Weaker economic climate in Europe holds back freight traffic recovery

The International Air Transport Association (IATA) announced international scheduled traffic results for January showing 9.1% growth in air freight compared to January 2010. With most major indices pointing to strengthening world trade and economic growth, this is positive for the industry’s prospects.

However, IATA warned that it is watching closely as events unfold in the Middle East. The region’s instability has sent oil prices skyrocketing. IATA’s current industry forecast is based on an average annual oil price of US$84 per barrel (Brent). Today the price is over US$100. For each dollar it increases, the industry is challenged to recover US$1.6 billion in additional costs. With US$598.0 billion in revenues, US$9.1 billion in profits and a profit margin of just 1.5%, even with good news on traffic 2011 is starting out as a very challenging year for airlines.

Air freight in January was 39.0% above the low point reached at the end of 2009 and some 6.0% above the pre-recession peak of early 2008. Freight has, however, fallen 2.0% since its May 2010 peak at the height of the re-stocking bubble.

Air freight volumes expanded at a robust 9.1% in January after a revised 7.3% in December and 6.9% in November.

Freight load factor stood at 49.2%. All regions reported levels relatively unchanged from a year ago. The seasonally-adjusted freight load factor of 53.0% reported in January is within a range of 52-54.0% since mid 2010, as demand and supply conditions are now stabilising.

January freight carried by Asia-Pacific carriers showed a 6.4% year-on-year increase. While this growth is slightly lower than the 7.2% reported for December 2010, the volume of freight carried by airlines based in the region actually increased by 2.0% during January alone. The growth in January takes the volume of air freight carried to 6.0% above the pre-recession peak level and 48.0% higher than the recession trough.

Freight carried by North American carriers was up 14.1% in January compared to levels a year ago, the highest of any region. The volume of traffic has grown by 11.0% since November last year, and now sits 10.0% above the pre-recession peak. The much weaker economic climate in Europe continues to hold back freight traffic recovery for airlines in that region. Volumes are still 11.0% below the pre-recession peak.

International freight traffic market shares by region in terms of Freight Tonne Kilometers (FTK) are Asia-Pacific 44.1%, Europe 23.9%, North America 16.9%, Middle East 10.9%, Latin America 3.0% and Africa 1.2%.