In fact, distinctly optimistic words have begun emerging from IATA, with its chief economist Brian Pearce saying there may even be not simply a leveling off , but an improvement in the sharp declines witnessed since December.
“There may be some light at the end of the tunnel with air freight,†Pearce told reporters during an end-March briefing.
While emphasised that the cargo market “is no where near the point†where a full recovery is expected but “we’re looking more at 10 per cent drops†in monthly freight volumes, he said.
While the declines have flattened out at around 20-22 per cent, Pearce said he expects there may be a slight pick-up over the next few months, but added that FTKs will still be about 10 per cent below last year’s levels.
Pearce says IATA is now forecasting that cargo traffic will go “sideways†rather than down over the remainder of the year based partly on surveys showing shippers to be not as pessimistic as they were a few months ago. Inventories are also at record lows and cargo carriers including FedEx have recently indicated they are seeing some stabilisation in the market.
This comes only weeks after air cargo executives gathering in Bangkok for the 3rd annual International Air Transport Association (IATA) World Cargo Symposium pessimistically mulled over the state of the industry in a desperate bid to find positive steps out of the crisis.
In remarks delivered by video to symposium in Bangkok, IATA’s director general and CEO Giovanni Bisignani said: “The industry is in crisis and nobody knows that better than our cargo colleagues. Cargo demand has fallen off a cliff .â€Â
Similarly, IATA’s head economist, Brian Pearce said at the event: “Our 2009 forecast of a five per cent drop in volume was called overly pessimistic in December. With January’s figures down 23.2 per cent, following December’s 22.6 per cent drop, it’s looking optimistic.â€Â
He did note at the time that IATA would produce a revised forecast at the end of March, hinting it will be significantly below the December figures. Pearce added that despite the gloom there were some positive signs. The latest inventory over-hang fi gures indicated companies would need to start replenishing stocks soon, providing short-term relief to the industry.
There are also bigger-picture indicators – such as confi dence surveys of purchasing managers that show improvement over the last two months – suggesting that the bottom may be in sight. And with the latest fiures out, IATA seems optimistic that the bottom has been reached.
Bottoming out?
February international freight volumes were 22.1 per cent below 2008 levels, according to the latest statistics from IATA. This is the third consecutive month at more than 20 per cent below previous year levels. Passenger volumes fell sharply to 10.1 per cent below 2008 levels.
“Gloom continues. The sharp drop in February passenger traffic shows the broadening scope of the crisis. Freight traffic, which began its decline in June 2008 before passenger markets were hit, has now had three consecutive months in the -22 to -23 per cent range. We may have found a bottom to the freight decline, but the magnitude of the drop means that it will take time to recover,†said Bisignani.
IATA said all cargo markets saw extremely weak demand continue as a result of the collapse in international trade in goods and the much lower shipment of components by manufacturers.
“However, the level of air freight appears to have found a floor over the past three months,†with IATA pointing to the recently released Eurozone Purchase Managers Indices as being useful forward looking indicators for cargo traffic, which showed a slight and unexpected improvement in March – although it remained in negative territory.
And while the mood in Bangkok was largely dark, the most common sentiment on offer was that the present crisis will ultimately prove to be just a temporary aberration of the overall air cargo growth trend.
“Demand may be at an all-time low, but the industry is cyclical and we will come out of the crisis,†said Aleks Popovich, global head of cargo at IATA, who exhorted participants to be ready to rapidly put capacity back in place when the inevitable return to more normal demand levels occurs.
Regional declines in Feb
Overall, Middle Eastern carriers experienced the smallest fall in demand (-4.8 per cent) and were the only region to increase capacity (+5.4 per cent).
African carriers had the worst performance with a 30.7 per cent drop in international freight traffic due to a loss of market share on long-haul routes combined with the impact of the economic downturn.
Asian carriers – the largest players in cargo – saw demand fall by 24.7 per cent as the region’s high-value export-dependant industries were hard hit by falling consumer demand in the major markets of Europe, the US and Japan. Japanese exports have almost halved from February 2008 levels.
European and North American carriers saw cargo demand decline 23.1 and 21.8 per cent respectively, with government stimulus plans having little impact on rekindling consumer demand at this point.
Latin American carriers experienced a demand drop of 22.8 per cent driven by weakening demand for the region’s commodities.
Bisignani reminded governments that air transport is a catalyst for economic activity and called for policy changes to help them to stimulate economies by playing this role effectively, including “a tax structure that will help preserve industry jobs and allow air transport to play its role as a catalyst for broad economic activity.â€Â
“Second, airlines need the commercial freedoms to be able to merge or consolidate where it makes business sense – even across national borders,†said Bisignani. Bisignani also warned that the burden of the crisis requires an industry response.
“This is not just an airline crisis.
Efficiency must be a priority for the entire value chain. A 25 per cent reduction in landing charges at Singapore Changi Airport and a 50 per cent reduction at Malaysian Airports are major steps in the right direction. These are model programmes for others to follow,†said Bisignani.
“The priority for airlines around the world is survival – conserving cash and adjusting capacity to match demand. This means re-sizing and re-shaping the industry to deal with the US$62 billion (12 per cent) fall in revenues expected this year. Airlines will be making some tough decisions to stay afloat as we head for industry losses of US$4.7 billion in 2009,†he warned.