Air cargo: IATA alarmed as freight volumes contract

Patrick Burnson, Executive Editor -- Logistics Management, 8/5/2008

SAN FRANCISCO—A clarion call of alarm was sounded yesterday as The International Air Transport Association (IATA) stated that global traffic data for June indicates a slowing of demand growth for air transport. Indeed, cargo contracted by 0.8 percent compared to June 2007. This is the first decline seen since May 2005 and follows several months of falling manufacturing sector confidence indicators. 

The organization’s director general, Giovanni Bisignani, described the overall airline industry as being “in trouble” and stated that “losses this year could reach $6.1 billion, more than wiping out the $5.6 billion that airlines made in 2007.”

While there’s been a slight reduction in passenger traffic due to rising fuel costs, too, IATA noted that it is the freight sector that is the most concerning. According to industry analysts, the major reduction in Asia Pacific traffic suggests a fall in demand caused either by customers switching to other cheaper transport modes or simply moving lower volumes.

Asia Pacific airlines led the contraction with a -4.8 percent year-on-year decline for June traffic, and Latin American airlines recorded the largest contraction (12.7 percent) as the region’s cargo sector continues to re-structure its capacity. European carriers, meanwhile, saw freight demand growth fall to 0.7 percent in June from 1.4 percent in May. North American carriers also saw freight demand growth slow to 4.0 percent in June from 4.6 percent in May.

“With consumer and business confidence falling and sky-high oil prices, the situation will get a lot worse,” said Bisignani.

He also suggested—hardly for the first time—that the economic conditions were “reshaping the airline industry,” an idea greeted with skepticism by some shippers.

“It is curious that we should hear this worrisome news when the airlines themselves are ordering more planes than ever before,” said Richard Macomber, chairman of the National Industrial Transportation League’s (NITL) air cargo committee. “Our members recognize that fuel rates are making it more expensive for the carriers to operate, but in the end, free market forces will prevail. When we need the space, the carriers will be able to provide it.”