It’s been an odd year

Most of the industry will likely be looking forward to the dawning of a new year, but likely with a large degree of trepidation.


Air France/KLM/SAS USChina


It’s been an odd year

Most of the industry will likely be looking forward to the dawning of a new year, but likely with a large degree of trepidation. This past year and a half has been a bit of rollercoaster with the euphoria associated with the rapid recovery at the end of 2010 slowly tuning to dread as it became apparent mid-way through 2011 that the market softening was was only going to get worse. And get worse it did. Month after month cargo numbers tumbled into negative growth and most disappointing – the complete absence of the traditional peak season. Looking ahead for 2012 there is probably not much to cheer about. High fuel prices driven up not by supply and demand, but by politics and speculators is a constant headache for the industry. A soft US economy and uncertainty in the Eurozone only add to the worries. And if you’re a carrier operating out of pretty much anywhere outside the Middle East, you can also hear the wolves at your door. An interesting trend out of Asia that has and will continue to have a major impact on the industry has been the China market. The ‘obsession’ with this market – for well-founded reasons as a colossal generator of cargo – has again bit many forwarders and carriers in the proverbial back side. This last year saw Chinese imports, which shot up in the crisis nearly two years ago and helped to sustain many in the industry through a particularly rough patch, gradually wind down. A number of factors are behind this, including declining central government stimulus spending, as well as the slowdown in manufacturing, a jump in factory wages, a real estate bubble and rising inflation. Add to this poor export volumes because of poor economic conditions in the US and Europe and the situation looks even bleaker. Once again the China air cargo market found itself awash in capacity. As Julian Keeling, CEO at Consolidators International (CII), an international freight forwarder and logistics provider observed, the overcapacity in both air and ocean, pushed rates down almost by the hour. “The ‘factory to the world’ is now operating at less than full throttle. The USChina honeymoon is over,” he observed. For Keeling, this all points to critical turning point in the industry where carriers – the weaker ones in Asia particularly – will be forced to join forces or disappear. “Even the strongest combination airlines will find solace in the arms of each other,” predicts Keeling. “The weak, ill-financed all-cargo carriers, particularly in Asia, either will join forces in desperation or disappear entirely,” he says rather darkly. As for Europe he believes governments there have grown tired of bailing out national flag carriers and further mergers are inevitable. “Mergers such as British Airways/Iberia may turn out to be mega consolidations as British Airways/Iberia/Alitalia and Air France-KLM to become Air France/KLM/SAS,” he predicts. Few in the industry are optimistic of any form of recovery before mid-year and even then, they are hesitant to predict because of the volatile economic situation in Europe. IATA is slightly more upbeat, reckoning that even if there is a collapse in the Eurozone, the market crash will not be as bad as last time around. Once again, fingers crossed as we head into the new year.