Judging by the spate of bad news of late, one could deduce that the much talked about industry downturn is now sinking its teeth in – and it would appear that its going to be more thanjust a flesh wound.
Bankruptcies and red-ink seem to be flying right, left and centre. Aloha Airlines and Oasis Airlines are the two most recent to go belly up, and many more are teetering on the brink. Alitalia, still caught up in a political tailspin has been described, most unkindly, by one industry veteran as "a flying corpse".
Even industry leaders like Singapore Airlines and Japan Airlines (this month’s cover story, p. 28), while still in the pink of health, are battening down the proverbial hatches in anticipation of worsening weather ahead.
In China, scene of enormous cargo growth, but also enormous competition for that cargo, it’s been a rough ride for some, like Shanghai Airlines which just turned in a US$62 million loss for 2007. In the US, things are dire. Delta Air Lines reported a second-quarter loss of US$18 million, though it was smaller than the one a year ago. Southwest Airlines said its earnings fell 47 per cent. And Continental Airlines projected a loss of $41.9 million. Northwest meanwhile – which has pulled its freighters off the transpacific (this month’s profile, page 34) – similarly reported a first quarter net loss of $191 million.
But its not all bad news. Lufthansa for instance reported a net profit of €57 million, while Europe’s biggest dedicated cargo carrier, Cargolux plunged into the red with a net loss of US$47 million – its first since 1993 – but only because of a US$155 million provision to cover potential fines from the global price-fixing scandal.
But one interesting area worth watching is the Russian cargo scene. Amongst all the doom and gloom, this is one market that seems to be building momentum in a very big way. Aeroflot, fresh from a batch of new aircraft orders is putting its house in order and growing volumes handsomely, Polet Cargo is doing well off the booming oil and gas sector, and the Volga-Dnepr Group – which operates the scheduled cargo airline, AirBridgeCargo – surprised everyone with a 2007 turnover of US$1.1 billion, up 51 per cent over 2006, also in large part due to the oil and gas sector. Even Moscow’s second airport, Domodedovo, is going gang-busters – in fact it’s doing so well the Russian government wants it back!
With rapidly increasing economic wealth, the country’s imports will continue to grow. With more Russians travelling abroad for holidays, this will further stoke the movement of goods, and increasingly high value goods. It may not sit well in some quarters, but Russia’s new found hydrocarbon wealth has not only moved it up quite a few rungs on the global economic hierarchy, but has also provided a welcome windfall for an increasingly worried air cargo industry.