January air traffic could signal start of slowdown: IATA

by Canadian Shipper

HONG KONG — According to the International Air Transport Association’s (IATA) international traffic data for January, capacity growth of 4.2% saw load factors inch up to 75.1%. International cargo demand growth remained sluggish, said the IATA’s report; at 4.5% for January it was largely unchanged from the 4.7% year-on-year growth recorded in December.

Air cargo has been growing at half the rate of global trade expansion, indicating a loss of market share to shipping which has benefited from faster ships and cheaper fuel costs, the association said. While aviation fuel rose 300% between 2002 and the first half of 2007, residual fuel for ships increased by 200%. During the last half of 2007 the gap narrowed with the sharp increase in prices. Both modes are experiencing a 500% increase in fuel costs compared to 2002. The result is that air cargo has clawed back some lost market share, masking any early impacts from the downturn in the US economy.

In the larger freight markets there is continued strength. Asia Pacific airlines saw demand increase 6.5%, up from 6% in December, boosted by the booming economies in China and India. European airlines saw freight slump to 0.4% in a pattern very similar to passenger traffic. Most of the air freight is carried on long-haul markets where business for the European airlines has suffered from the strong Euro.

“January traffic results show that we could be at a turning point. A month’s data is not enough to define a trend, however, the sharp shift in demand growth patterns makes it clear that the US credit crunch is negatively impacting air travel. Fasten your seatbelts. There is likely to be turbulence ahead,” said Giovanni Bisignani, IATA’s director general and CEO.

“This is an unusual situation for the industry. Asia outside of Japan is looking strong, even as the US economy weakens. This highlights the need for the air transport industry to globalise. The outdated bilateral system and national ownership rules will prevent the industry from responding as a normal business to economic shifts. Airlines cannot diversify risk, so the parts of the industry will see the impact of the US credit crunch with very little buffer. This must change,” said Bisignani.

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