International Freight Forwarder Association

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Air Transport Market Analysis

Thursday, December 30, 2010

  • Growth rates for passenger and freight traffic stepped down in November, but still little sign of any broader slowdown as yet;
  • Air travel volumes (RPKs) were 8.2% higher than November last year, down on the 10% increase in October;
  • This was due to combined effect of the strength of recovery this time last year as well as a 0.8% fall in RPKs compared to October's level;
  • However, even with the dip in November, annualized growth so far this year is 6% - in line with historical growth trends;
  • Air freight growth rates (FTKs) also stepped down with November's result of 5.4% well below the 14.5% recorded for October;
  • This reduction in growth rate was driven (as with the passenger result) by exceptionally strong growth in November last year and by a fall in absolute terms of just over 1% for the month;
  • Freight volumes have fallen back from the new peak seen in May this year as stimulus from restocking activity has tailed off;
  • Even so, annualized growth in freight traffic so far this year is still in line with historic trends;
  • Passenger load factors continue to hold steady in the 78-79% range, while freight utilization is slipping slowly - although is still at fairly high levels by historical standards;
  • Regional variation is evident but emerging market momentum should mean the current expansion in air travel and freight traffic has further to run.

Freight Demand

  • The air freight recovery hit a peak in May 2010. Compared to that peak, volumes have fallen 7%. The volume of air freight in November was equal to pre-recession levels of early 2008.
  • November’s year-on-year growth of 5.4% is a significant shift from the 14.5% recorded in October. This was exaggerated by the exceptionally strong performance in November 2009. In absolute terms, there was a 1.1% fall in freight volumes from October to November. All regions, except Africa, showed dramatic drops in year-on-year growth rates from October to November.
  • November freight carried by Asia-Pacific carriers showed a 4.1% year-on-year increase. The region’s carriers moved a similar amount of freight in November that they did at the pre-recession peak of 2008.
  • Middle Eastern carriers saw 12.4% year-on-year growth for November. The region’s carriers handled 14% more freight in November than they did at the pre-recession peak in early 2008.
  • North American carriers showed 1.5% year-on-year growth in November, but overall volumes remain 7% below the pre-recession levels of early 2008. European carriers experienced a similar pattern with 6.6% year-on-year growth in November but overall volumes remaining 12% below pre-recession levels.

“The year-end holiday season has been tough for travelers and for airlines. Exceptionally adverse weather conditions in Europe and the US resulted in travel chaos. Passengers were inconvenienced. Airlines saw lost revenues and saw costs rise. As the backlogs of stranded passengers clear and the situation normalizes, there are two opportunities that must not be lost. The first is to learn and apply lessons from this difficult season so that all stakeholders in the industry’s infrastructure are better prepared for future exceptional situations,” said Bisignani.

“The second opportunity is to evaluate the regulatory world in which aviation operates. In 2010, the Icelandic volcano and the year-end adverse weather made the value of air transport crystal clear. Modern life and the global economy depend on aviation. Whether you are a business person operating in the global market, families keeping in touch across distances or heads-of-state on important foreign missions, aviation is critical. While memories of the travel chaos are still fresh, it’s time to evaluate a long list of government imposed industry handicaps, including excessive taxation, out-dated ownership restrictions, over-regulation where market forces could do better, under-investment in infrastructure and generally poor regulation of monopoly suppliers. We must not let governments forget all of this while waiting for a change of seasons,” said Bisignani.

“For our part, IATA is launching Vision 2050—a dialogue on the industry’s future among strategic thinkers from government, industry and academia. We will meet in Singapore this February with an important mission to build a vision for a successful and sustainable industry in four decades. The group will be guided by the inspirational support of Singapore’s Minister Mentor Lee Kuan Yew and the expertise on competitiveness of Harvard University’s Professor Michael Porter. Our common goal is to fortify the foundations of the industry to support its ever-growing role in supporting modern life in our global world,” said Bisignani.