Airfreight continues to struggle

The International Air Transport Association (IATA) reported December and full-year 2009 demand statistics for international scheduled air traffic that showed the industry ending 2009 with the largest ever post-war decline. Passenger demand for the full year was down 3.5 per cent with an average load factor of 75.6 per cent. Freight showed a full-year decline of 10.1 per cent with an average load factor of 49.1 per cent.

“In terms of demand, 2009 goes into the history books as the worst year the industry has ever seen,” says Giovanni Bisignani, IATA’s Director General and CEO. “We have permanently lost 2.5 years of growth in passenger markets and 3.5 years of growth in the freight business.”

In December 2009 freight capacity grew 0.6 per cent above December 2008 levels. Yields have started to improve with tighter supply-demand conditions in recent months, but they remained 5 to 10 per cent down on 2008 levels. “Revenue improvements will be at a much slower pace than the demand growth that we are starting to see,” says Bisignani. “Profitability will be even slower to recover and airlines will lose an expected US$5.6 billion in 2010.”

Seasonally adjusted demand figures for December compared to November 2009 indicate a 1.6 per cent rise in passenger traffic while freight remained basically flat with a 0.2 per cent decline.

International Freight Demand
December 2009 freight demand showed a 24.4 per cent improvement on December 2008 with a load factor of 54.1 per cent. This improvement is exaggerated by the exceptionally weak performance in December 2008 which was the low point on the cycle. Freight demand is still 9 per cent lower than the peak in early 2008. Optimism is returning to the industry as purchasing managers survey indicators reached a 44-month high in December pointing towards increased freight volumes in the coming months.

Asia-Pacific carriers accounted for over 60 per cent of the increase in international air freight markets over the past 12 months—outperforming their 45 per cent market share. Despite this improvement, Asia-Pacific carriers’ freight volumes remain 8 per cent below peak levels.

European carriers remain 20 per cent below 2008 peak levels reflecting the glacial pace of economic recovery in Europe compared to Asia-Pacific.

Middle East carriers and Latin American carriers are smaller market participants, but ended the year better than peak levels by 7 per cent and 21 per cent respectively.

“The industry starts 2010 with some enormous challenges,” says Bisignani. “The worst is behind us, but it is not time to celebrate. Adjusting to 2.5 to 3.5 years of lost growth means that airlines face another spartan year focused on matching capacity carefully to demand and controlling costs.”

“We also face a renewed challenge on security as a result of the events of 25 December 2009,” he added. “The approach of the Obama administration is encouraging with Department of Homeland Security Secretary Janet Napolitano visiting IATA’s offices in Geneva to engage industry to find solutions. We agreed that governments and industry must cooperate and we are preparing for a meeting in the coming weeks to follow-up on our recommendations which focused on finding more efficient ways to implement intelligence-driven and risk-based security measures.”

“Governments and industry are aligned in the priority that we place on security. But the cost of security is also an issue. Globally, airlines spend US$5.9 billion a year on what are essentially measures concerned with national security. This is the responsibility of governments, and they should be picking up the bill.”